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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO.: 33-14982 - LA
BREAKTHROUGH ELECTRONICS, INC.
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(Name of Small Business Issuer in its Charter)
NEVADA 88-0226208
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3179 West Sahara, Suite D-21
Las Vegas, Nevada 89102
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (702) 368-0664
Securities Registered Pursuant to Section 12(g) of the Act:
None
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Check whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not obtained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $0.
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State the aggregate market value of voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days: The Company's stock has traded on
only a very limited and sporadic basis for several years, and it is difficult,
if not impracticable, therefore, to determine the market value of equity held by
non-affiliates. However, the aggregate market value of the Registrant's voting
stock held by non-affiliates computed with reference to actual sales prices in
the over-the-counter market as of the date of this report, was approximately
$40,400.
As of the date of the filing of this report, the Registrant had
outstanding a total of 710,538 shares of its common stock, par value $ 0.001,
after giving effect to a 1-for-100 reverse split effectuated by the
Registrant in 1998.
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TABLE OF CONTENTS
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<TABLE>
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ITEM NUMBER AND CAPTION PAGE NO.
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PART 1
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .9
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . .9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Item 6. Management's Discussion and Analysis or Plan of Operations. . . . 11
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . .F-1
Item 8. Changes in and Disagreements on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act. . . . . . . . .13
2
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Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . 14
Item 11. Security Ownership of Certain Beneficial Owners and Management. . 15
Item 12. Certain Relationships and Related Transactions. . . . . . . . . . 16
Item 13. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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PART I
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ITEM 1. BUSINESS
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HISTORY
Breakthrough Electronics, Inc. (the "Company"), was incorporated as a
Nevada corporation on July 31, 1986, under the name "Queens Mining Company," to
engage in mining exploration on certain placer mining claims in Esmeralda
County, Nevada. In June, 1987, after the Company acquired all of the rights to
an electronic device, known as the "Phoneguard," capable of screening telephone
calls from its then President, Barry Rose, the Company changed its name to
"Breakthrough Electronics, Inc." and changed its business focus to developing
and marketing various electronic products. The Company pursued these
development efforts for a number of years, and ultimately was forced to
terminate these business activities due to lack of funding.
For the past several years, the Company has been inactive. Over the past
several years, the Company has had no operations, and no material assets or
liabilities. Over the past two years, the Company has been engaged in efforts
to reactivate its business, and to seek a suitable business opportunity in which
the Company may become engaged, discussed below.
GENERAL
The Company has had no operations, or significant assets or liabilities
over the past six (6) years. Accordingly, the Company is dependent upon
management and/or significant shareholders to provide sufficient working capital
to preserve the integrity of the corporate entity during this phase. It is the
present intent of management and significant shareholders to provide any working
capital necessary to support and preserve the integrity of the corporate entity
until such time as additional capital is raised, if ever.
The Company has no operations, assets or liabilities and, accordingly, is
fully dependent upon its officers and directors and controlling shareholders for
operating capital. During the period(s) presented herein, the Company was
dormant, except for certain monies paid to the Company by
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officers and certain principal shareholders to provide the Company with funds
to pay expenses. (See "Item 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.")
The Company has been under new management since 1997. Since that time,
the Company and its officers have been undertaking efforts to update financials
statements over the preceding fiscal quarters, and to put the Company in a
position to begin evaluating a number of business ventures for possible
acquisition or participation by the Company. The Company has not entered into
any agreement, as of the date of this filing. The Company intends to
investigate, review, and evaluate business opportunities as they become
available and will seek to acquire or become engaged in business opportunities
at such time as specific opportunities warrant.
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis regarding the quality of the
other firm's management and personnel, the asset base of such firm or
enterprise, the anticipated acceptability of new products or marketing concepts,
the merit of the firms business plan, and numerous other factors which are
difficult, if not impossible, to analyze through the application of any
objective criteria.
Now that the Company has completed necessary preparatory work to update the
Company's financial statements and bring the Company current, the Company will
begin efforts to seek to acquire an interest in a business with long-term growth
potential. It is emphasized that the business objectives discussed herein are
extremely general and are not intended to be restrictive on the discretion of
the Company's management.
Management anticipates that it may be able to participate in only one
potential business venture, due primarily to the Company's limited capital.
This lack of diversification should be considered a substantial risk, because it
will not permit the Company to offset potential losses from one venture against
gains from another.
In connection with the Company's acquisition of a business, it is possible
that the present shareholders of the Company, may, as a negotiated element of
the acquisition, sell a portion or all of the Company's Common Stock held by
them at a premium over their original investment in the Company. As a result
of such sales, affiliates of the entity participating in the business
reorganization with the Company would acquire a higher percentage of equity
ownership in the Company. Management does not intend to actively negotiate for
or otherwise require the purchase of all or any portion of its stock as a
condition to or in connection with any proposed merger or acquisition. Although
the Company's present shareholders did not acquire their shares of Common Stock
with a view towards any subsequent sale in connection with a business
reorganization, it is not unusual for affiliates of the entity participating in
the reorganization to negotiate to purchase shares held by the present
shareholders in order to reduce the amount of shares held by persons no longer
affiliated with the Company and thereby reduce the potential adverse impact on
the public market in the Company's common stock that could result from
substantial sales of such shares after the business reorganization. Public
investors will not receive any portion of the premium that may be paid in the
foregoing circumstances. Furthermore, the Company's shareholders may not be
afforded an opportunity to approve or consent to any particular stock buy-out
transaction.
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In the event sales of shares by present shareholders of the Company is a
negotiated element of a future acquisition, a conflict of interest may arise
because directors will be negotiating for the acquisition on behalf of the
Company and for sale of their shares for their own respective accounts. Where a
business opportunity is well suited for acquisition by the Company, but
affiliates of the business opportunity impose a condition that management sell
their shares at a price which is unacceptable to them, management may not
sacrifice their financial interest for the Company to complete the transaction.
Where the business opportunity is not well suited, but the price offered
management for their shares is high, Management will be tempted to effect the
acquisition to realize a substantial gain on their shares in the Company.
Management has not adopted any policy for resolving the foregoing potential
conflicts, should they arise, and does not intend to obtain an independent
appraisal to determine whether any price that may be offered for their shares is
fair. Stockholders must rely, instead, on the obligation of management to
fulfill its fiduciary duty under state law to act in the best interests of the
Company and its stockholders.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance on exemptions from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of the transaction, the Company may agree to register such
securities either at the time the transaction is consummated, under certain
conditions, or at specified times thereafter. Although the terms of such
registration rights and the number of securities, if any, which may be
registered cannot be predicted, it may be expected that registration of
securities by the Company in these circumstances would entail substantial
expense to the Company. The issuance of substantial additional securities and
their potential sale into any trading market which may develop in the Company's
securities may have a depressive effect on such market.
Notwithstanding the fact that the Company is technically the acquiring
entity in the foregoing circumstances, generally accepted accounting principles
will ordinarily require that such transaction be accounted for as if the Company
had been acquired by the other entity owning the business and, therefore, will
not permit a write-up in the carrying value of the assets of the other company.
The manner in which the Company participates in a business will depend on
the nature of the business, the respective needs and desires of the Company and
other parties, the management of the business, and the relative negotiating
strength of the Company and such other management.
The Company will participate in a business only after the negotiation and
execution of appropriate written agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require specific
representations and warranties by all of the parties thereto, will specify
certain events of default, will detail the terms of closing and the conditions
which must be satisfied by each of the parties prior to such closing, will
outline the manner of bearing costs if the transaction is not closed, will set
forth remedies on default, and will include miscellaneous other terms.
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OPERATION OF BUSINESS AFTER ACQUISITION
The Company's operation following its acquisition of a business will be
dependent on the nature of the business and the interest acquired. The Company
is unable to predict whether the Company will be in control of the business or
whether present management will be in control of the Company following the
acquisition. It may be expected that the business will present various risks,
which cannot be predicted at the present time.
GOVERNMENTAL REGULATION
It is impossible to predict the government regulation, if any, to which the
Company may be subject until it has acquired an interest in a business. The use
of assets and/or conduct of businesses which the Company may acquire could
subject it to environmental, public health and safety, land use, trade, or other
governmental regulations and state or local taxation. In selecting a business
in which to acquire an interest, management will endeavor to ascertain, to the
extent of the limited resources of the Company, the effects of such government
regulation on the prospective business of the Company. In certain
circumstances, however, such as the acquisition of an interest in a new or
start-up business activity, it may not be possible to predict with any degree of
accuracy the impact of government regulation. The inability to ascertain the
effect of government regulation on a prospective business activity will make the
acquisition of an interest in such business a higher risk.
BUSINESS
The Registrant has not been actively engaged in business for the past
several years, and has only recently undertaken necessary activities to enable
it to become engaged in business operations. The Company plans to seek out,
investigate and acquire, or become engaged in, any business opportunity
management believes has good business potential. No specific business or
industry is presently contemplated.
Management anticipates that it will only acquire businesses which have, or
can generate or provide, audited financial statements. However, management
reserves the right to become engaged in a new business venture or a venture in
its infancy, if management determines such venture holds good business
potential.
The Company recognizes that because of its extremely limited financial,
management and other resources, the number of quality of suitable potential
business ventures available to it may be extremely limited.
The Company's principal business objective will be to seek long-term growth
potential in the business venture in which it participates, rather than to seek
immediate, short-term earnings. In seeking to attain the Company's business
objective, it will not restrict its search to any particular business or
industry, but may participate in business ventures of essentially any kind or
nature, including, but not limited to, finance, high technology, manufacturing,
natural resources, service, research and development, communications, insurance,
transportation and others. Management's
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discretion will be unrestricted and it may participate in any business
venture whatsoever, which meets the business objectives discussed herein. It
is emphasized that the business objectives of the Company are extremely
general and are not intended to be restrictive upon the discretion of
management.
The Company plans to seek one or more potential business ventures from its
known sources, but will rely heavily on personal contacts of its officers and
directors, as well as indirect associations or contacts between them and other
business and professional people. It is not presently anticipated that the
Company will engage professional firms or individuals specializing in business
acquisitions or reorganizations. However, any individual or firm, exclusive of
the officers, directors and principals of the Company who find a venture in
which the Company becomes engaged, may be properly compensated for their
efforts.
The Company will not restrict its search to a venture in any particular
stage of development, but may acquire or become engaged in a venture in its
preliminary or development stage, may participate in a business which is already
in operation, or in a business in various stages of it corporate existence. It
is impossible to predict at this stage the status of any venture in which the
Company may participate, in that the venture may need additional capital, may
desire to have its shares publicly traded, or may seek other perceived
advantages which the Company, as a public company, may offer. In some
instances, the business endeavors may involve the acquisition of or merger or
reorganization with a corporation which does not need substantial additional
capital but which desires to establish a public trading market for it
securities.
Firms which seek the Company's participation in their operations through a
reorganization, asset acquisition, or some other means may desire to do so to
avoid what such firms may deem to be adverse factors related to undertaking a
public offering. Such factors include substantial time requirements and legal
and other costs, along with other conditions or requirements imposed by various
state and federal regulatory agencies.
To a large extent, a decision to participate in a specific business
endeavor may be made upon management's analysis of the quality of the other
firm's management and personnel, the anticipated acceptability of new products,
marketing concepts or services, the merit of technological changes, and numerous
factors which may not be reflected on a balance sheet or operating statement and
are difficult, if not impossible, to analyze through the application of
objective criteria. In many instances, it anticipated that the results of
operation of a specific venture may not be indicative of the potential for the
future because of the requirement to substantially shift marketing approaches,
expand significantly, change product emphasis, change or augment management, and
other factors. Because the Company may participate in business endeavors with
newly organized firms or with firms which are entering a new phase of growth, it
should be emphasized that the Company will incur further risks since management
in may instances will not have proved its abilities or effectiveness, the
eventual market of such firm's product or services will likely not be
established, and the profitability of the firm will be unproved and cannot be
accurately predicted.
The analysis and review of new business ventures will be undertaken by or
under the supervision of the officers and directors. It cannot be stated at
this time as to whether management
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will have any significant business experience or expertise in any type of
business which is likely to be investigated by the Company. Therefore,
management will have to rely on its common sense and business judgment as
well as upon the advice of consultants to analyze the factors described
above. In reviewing prospective business opportunities, management will
consider such matters as the available technical, financial and managerial
resources, the working capital and other financial requirements, the history
of operations, if any; prospects for the future; the nature of present and
expected competition; the quality and experience of management services
available and the depth of management; the potential for growth and
expansion; risk factors; the perceived public recognition or acceptance of
products, services; and other factors.
Generally, management will attempt to analyze all available factors in the
circumstances and make a determination based upon a composite of available
facts, without reliance upon any single factor as controlling.
The Company is unable to predict the timing as to when it may participate
in any specific business endeavor. It expects, however, that the review of
business opportunities will commence immediately, and that the analysis and
selection of any given venture may take several months or more.
It is anticipated that business opportunities will be available to the
Company from various sources, including its officers and directors and
shareholders and their business associates, professional advisors, securities
broker-dealers, venture capitalists, members of the financial community, and
others who may present unsolicited proposals. In certain circumstances, the
Company may agree to pay a finder's fee or to otherwise compensate investment
banking or other services provided by persons who are unaffiliated with the
Company but who submit a potential business opportunity in which the Company
elects to participate. No such finder's fee or other fees will be paid to any
person who is an officer, director or principal of the Registrant.
The Company may acquire a business venture by conducting a reorganization
or merger involving the issuance of securities of the Company. Due to the
requirements of certain provisions of the Internal Revenue Code, as amended, in
order to obtain certain beneficial tax consequences in such transactions, the
number of shares held by all of the present shareholders of the Company prior to
such transaction, may be substantially less than the total outstanding shares
held by such shareholders in any reorganized entity. The result of any such
reorganization or merger transaction could be additional substantial dilution to
the shareholders of the Company prior to the transaction.
It is anticipated that the investigation of specific business endeavors and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys, and others. If a
decision is made not to participate in a specific business opportunity under
review, the costs theretofore incurred would not be recoverable. Further, even
if an agreement is reached for the participation in a specific business venture,
the failure to consummate that transaction may result in the loss to the Company
of the related costs incurred.
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The Company presently has essentially no assets, and does not currently
have any specific assets, properties or businesses in mind for potential
acquisition or involvement by the Company. Further, the Company does not
presently have any particular areas of business or industry in which it intends
to look for business opportunities.
In connection with a business acquisition or transaction, the Company may
need to raise equity or debt to fund such transaction, or to provide the
business opportunity with necessary operating capital. There is no assurance
the Company will be able to raise capital when needed, or on terms which are
favorable to the Company.
OFFICES AND EMPLOYEES
The Company presently uses the office of its President, at 3170 West
Sahara, Suite D-21, Las Vegas, Nevada, at no charge. At such time as business
operations actively commence, the Company will be required to seek office space
and may be charged a reasonable market rate for its office facilities; however,
the Company may be able to utilize the offices of an entity with which it
merges, or by which it is acquired or which it acquires. The Company has no
employees.
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ITEM 2. PROPERTIES
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The Company does not hold any properties.
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ITEM 3. LEGAL PROCEEDINGS
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The Company is not a party to any material pending legal proceedings, and
no such proceedings by or, to the best of its knowledge, against the Company
have been threatened.
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ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
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No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report. In August, 1998, the board of directors and
holders of a majority of the then issued and outstanding voting stock of the
Company approved a 1-for-one hundred reverse in the issued and outstanding
common stock of the Company, which action was ratified by the board of directors
in February, 1999.
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PART II
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ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
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Although quotations for the Company's common stock appear on the OTC
Bulletin Board, there is no established trading market for the common stock.
During the past two years, transactions in the common stock can only be
described as very limited and sporadic. Consequently, the Company is of the
opinion that any published prices cannot be attributed to a liquid and active
trading market and, therefore, are not indicative of any meaningful market
value. The Company's shares of common stock are currently eligible for
quotation on the Electronic Board Bulletin Board under the symbol "BKEL."
The following table sets forth for the respective periods indicated the
prices of the Company's Common Stock in the over-the-counter market, as reported
and summarized by the OTC Bulletin Board. Such prices are based on inter-dealer
bid and asked prices, without markup, markdown, commissions, or adjustments and
may not represent actual transactions.
<TABLE>
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CALENDAR QUARTER ENDED HIGH BID ($) LOW BID ($)
<S> <C> <C>
March 31, 1998 $ .125 $ .125
June 30, 1998 .125 .125
September 30, 1998 .125 .125
December 31, 1998 .125 .125
March 31, 1999 .125 .125
June 30, 1999 1.125 .125
</TABLE>
In February, 1999, the Company authorized the issuance of a total of
200,000 shares of post-split restricted common stock to Lawrence Grobstein,
Secretary/Treasurer, for $10,000 cash, and 5,000 shares of restricted common
stock each to Lawrence Sapperstein, President, and Anthony Adimey, a director,
for services rendered on behalf of the Company. In December, 1997, the Company
authorized the issuance of a total of 171,199 shares to Kirby Cochran (80,000
shares for cash and services); Roger Lund (51,199 shares for cash and services)
and James C. Lewis (40,000 shares for services rendered), for cash and services
contributed to the Company valued at $17,120. The shares of common stock
issued in these transactions, are "restricted" within the meaning of the
Securities Act of 1933 as amended ("Securities Act"), and such stock was issued
in reliance upon the exemption from registration set forth under Section 4(2) of
the Securities Act. Each of the individuals who acquired the common stock were
provided with all
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pertinent information regarding the Company, and executed a representation
letter evidencing their investment intent with respect to the shares
acquired. The shares of common stock issued in these transactions may be
sold only in compliance with all of the terms and conditions of Rule 144
promulgated under the Securities Act. (See "ITEM 12: CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS.")
Since inception, no dividends have been paid on the Company's common stock,
and the Company does not anticipate paying dividends in the foreseeable future.
As of the date of filing this report, there were approximately 375 holders
of record of the Company's common stock.
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ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had very limited cash ($780),
liabilities of $9,580, and no other liquid assets or resources.
At present, the Company does not have adequate capital to conduct any
significant operations. The Company is engaged in the search for potential
business opportunities for acquisition or involvement with the Company, which
activities are severely limited by the Company's lack of resources. Management
believes that any business venture in which the Company becomes involved will be
made by issuing shares of the Company's authorized but unissued common stock.
It is anticipated that the Company's liquidity, capital resources and financial
statements will be significantly different subsequent to the consummation of any
such transaction.
The Company is dependent upon management and/or its principal shareholders
to provide sufficient working capital to preserve the integrity of the corporate
entity during this phase, and until the Company is in a position to enter into a
business transaction, of which there can be no assurance. It is the intent of
management and its principal shareholders to provide sufficient working capital
necessary to support and preserve the integrity of the corporate entity.
However, if the Company is in need of additional capital to enter into a
business opportunity, the Company may not have sufficient capital, or be able to
obtain sufficient capital from management or its principal shareholders for such
purpose.
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RESULTS OF OPERATIONS
The Company had essentially no operations during the fiscal year ended
December 31, 1998.
The Company incurred expenses during the year ended of $12,340 in
accounting, legal and other general and administrative expenses in connection
with the Company's continuing efforts to file necessary periodic reports and to
reactivate its business operations, and in reviewing a number of possible
business opportunities during the fiscal year.
As indicated, the Company will be dependent on management and its principal
shareholders to provide sufficient capital to preserve the integrity of the
corporate entity until the Company enters into a business enterprise.
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ITEM 7.
FINANCIAL STATEMENTS
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The following financial statements of the Company appear at the end of this
report, beginning with page F-1:
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TITLE PAGE NO.
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Independent Accountants' Report of Paul Healey,
Certified Public Accountant F-3
Balance Sheets as of December 31, 1998 and 1997 F-4
Statement of Operations for the three years ended December 31, 1998,
1997, and 1996 F-5
Statement of Stockholders' Equity for the years ended December 31, 1998 F-6
Statement of Cash Flows for the three years ended December 31, 1998 F-7
Notes to Financial Statement F-8
</TABLE>
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ITEM 8.
CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
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There have been no changes in or disagreements with accountants since the
Company's organization.
PART III
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ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT
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NAMES AND TERMS OF OFFICE
The table below sets forth the name, age, and position of each executive
officer and director of the Company.
<TABLE>
<CAPTION>
Name Age Position Since*
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<S> <C> <C> <C>
Larry A. Sapperstein 75 President and Director November,1997
Lawrence Grobstein 48 Secretary/Treasurer
and Director June, 1998
Anthony Adimey 35 Director November, 1997
</TABLE>
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The term of office of any executive officer and director is one year and
until his successor is elected and qualified.
Set forth below is biographical information for the Company's sole
officer/director:
LAWRENCE A. SAPPERSTEIN, President and a director, has been a certified
public accountant in Las Vegas, Nevada, since 1972. For the past 20 years, he
has owned and operated his own accounting and tax practice in Las Vegas, Nevada,
under the name "Lawrence Business Services, Inc." From 1972 to 1979, Mr.
Sapperstein was employed by a local Las Vegas certified
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public accounting firm. Mr. Sapperstein has been semi-retired for
approximately the last year, after turning over his accounting practice to
his son. Mr. Sapperstein attended George Washington University, Washington
D.C., where he studied accounting. Mr. Sapperstein was born on June 29, 1924
in Baltimore, Maryland. Mr. Sapperstein served on the board of directors of
Cipher Voice, Inc., which completed a reorganization with Galaxy Enterprises
in June, 1996.
LAWRENCE GROBSTEIN, Secretary/Treasurer and a director, graduated from
the University of Utah, Salt Lake City, Utah, in 1972 with an undergraduate
degree in marketing. From 1993 to the present, he has been employed in
various management capacities, including sales manager and business manager,
by Mike Hale Acura and Mike Hale Chevrolet-Oldsmobile, Salt Lake City
automobile dealerships. From 1988 to 1993, Mr. Grobstein was employed by Osh
Gosh B'Gosh, a clothing manufacturing and marketing company, as regional
territory manager.
ANTHONY ADIMEY, a member of the board of directors, has been engaged in
various private enterprise over the past 2 years. Since June, 1997, he has
operated a business assisting people in setting up their own home based
business, and has taught dozens of seminars teaching people skills in owning
and operating a home based business and related topics. From September 1997
to the present, he has been engaged in private stock trading for his own
account. From 1989 to 1997, Mr. Adimey was the president, general manager
and co-owner of New Adventures, Inc., Las Vegas, Nevada, a communications
company specializing in national voice mail, answering services, and
telephone and credit card billing services. New Adventure, Inc., was sold in
1997. In 1997, Mr. Adimey was responsible for communications and marketing
of Strikers USA, Ltd., a multi-million dollar pool tournament. Mr. Adimey
attended one year of college at The University of Nevada at Las Vegas, and
one semester of computer training at Clark Community College.
CONTROL PERSONS
In December, 1997, the Company issued a total of 171,199 post-split shares
of common stock to Kirby Cochran, Roger Lund and James C. Lewis, in
consideration of cash and services contributed to the Company. In February,
1999, the Company sold a total of 200,000 post-split shares of restricted common
stock to Lawrence Grobstein, for the sum of $10,000. These individuals may be
considered to be "control persons" of the Company. (See "ITEM 11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT").
- ------------------------------------------------------------------------------
ITEM 10. EXECUTIVE COMPENSATION
- ------------------------------------------------------------------------------
REMUNERATION DURING FISCAL YEAR
During the fiscal year ended December 31, 1998, no officer or director
received any cash compensation. Set forth below is a summary of all
compensation received by officers and directors during the fiscal year:
14
<PAGE>
CASH COMPENSATION TABLE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL CAPACITY IN WHICH CASH
OR NUMBER IN GROUP SERVED
COMPENSATION
- ------------------------------------------------------------------------------
<S> <C> <C>
Lawrence Sapperstein President, Director $0 in cash
Lawrence Grobstein President, Director $0 in cash (1)
Anthony Adimey Director $0 in cash
</TABLE>
(1) In February, 1999, Mr. Grobstein purchased a total of 200,000 shares
of common stock for $10,000. (See "ITEM 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.")
- ------------------------------------------------------------------------------
ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------------
The following table sets forth the name and address, as of the date of the
filing of this report, the approximate number of shares of common stock owned of
record or beneficially by each person who owned of record, or was known by the
Company to own beneficially, more than 5% of the common stock, and the name and
shareholdings of each officer and director, and all officers and directors as a
group:
<TABLE>
<CAPTION>
Amount and Nature of Ownership
------------------------------
Sole Voting Shared Voting
Name of Person and Investment and Investment Percent of
or Group Power(1) Power Class
------------ ------------ ----------- ----------
<S> <C> <C> <C>
PRINCIPAL SHAREHOLDERS:
Lawrence Grobstein 200,000 -0- 28.15
Kirby Cochran 80,000 -0- 11.26
Roger Lund 51,199 -0- 7.21
James C. Lewis 40,000 -0- 6.00
15
<PAGE>
OFFICERS AND DIRECTORS:
Lawrence Sapperstein 9,682(2) -0- 1.37
Lawrence Grobstein ----------------------------------See above----------------------------
Anthony Adimey 6,000 -0- .8
ALL OFFICERS AND DIRECTORS AS
A GROUP (3 PERSONS): 215,682 -0- 30.35
</TABLE>
(1) See "ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
(2) Includes 4,682 Shares held in a closely-held company owned by Mr.
Sapperstein.
- ------------------------------------------------------------------------------
ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------------------------------------------------------------------------------
SALES, ISSUANCES AND TRANSFERS OF RESTRICTED STOCK
In February, 1999, the Company sold a total of 200,000 post-split
restricted shares of common stock to Lawrence Grobstein, Secretary/Treasurer
and a director, for the sum of $10,000. This stock was sold to provide the
Company with necessary operating capital to perform administrative tasks and
continue business.
In February, 1999, the Company issued a total of 5,000 shares each to
Lawrence Sapperstein, President and director, and Anthony Adimey, a director,
for services rendered on behalf of the Company.
In December, 1997, the Company authorized the issuance of a total of
171,199 shares of post-split restricted common stock to Kirby Cochran, Roger
Lund and James C. Lewis, legal counsel, for services rendered in connection with
efforts to reactivate the Company and cash having a total value of $17,120, as
follows: Kirby Cochran - 80,000 shares; Roger Lund - 51,199 shares; and James C.
Lewis - 40,000 shares.
None of the transactions described above can be considered to be the result
of arms' length negotiations. All of the share figures described above give
effect to a 1-for-100 reverse split authorized by the Company's shareholders in
August, 1998.
16
<PAGE>
PART IV
- --------------------------------------------------------------------------------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
EXHIBITS
Copies of the following documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exhibit No. SEC Ref. Title of Document Page No.
1 (3)(i) Articles of Incorporation, as amended E-1
2 (3)(ii) By-Laws E-2
3 (27) Financial Data Schedules *
</TABLE>
* The Financial Data Schedule is presented only in the electronic filing with
the Securities and Exchange Commission.
REPORTS ON FORM 8-K
During the fiscal year ended December 31, 1998, the Company filed no
reports on Form 8-K.
17
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
REGISTRANT:
BREAKTHROUGH ELECTRONICS, INC.
By /s/ Lawrence A. Sapperstein
-------------------------------------------------
Lawrence Sapperstein, Principal Executive Officer
Date: August 15, 1999
-------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
By /s/ Lawrence A. Sapperstein
-------------------------------------------------
Lawrence A. Sapperstein, President, and Principal
Executive Officer and Principal Financial Officer
Date: August 15, 1999
-------------------------------------------
By /s/ Lawrence Grobstein
-------------------------------------------------
Lawrence Grobstein, Secretary/Treasurer
Date: August 15, 1999
-------------------------------------------
18
<PAGE>
PAUL M. HEALEY
Certified Public Accountant
3170 W. Sahara, Suite D-21
Las Vegas, NV 89102
(702) 368-0664 Phone - (702) 368-1363 Fax
Independent Auditor Report
April 17, 1999
To the Board of Directors and Shareholders of
Breakthrough Electronics, Inc.
Las Vegas, NV
I have audited the accompanying balance sheets of Breakthrough Electronics, Inc.
(A Development Stage Company) as of December 31, 1998 and 1997 and the related
statements of income and retained earnings, cash flows and changes in
stockholders' equity for the three years then ended, and for the period from
July 31, 1986 (Inception) to December 31, 1998. These financial statements are
the responsibility of the company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements audited by me present fairly, in all
material respects, the financial position of Breakthrough Electronics, Inc., at
December 31, 1998 and 1997, and the results of its operations and cash flows,
and changes in stockholders' equity for the three years then ended, and for the
period from July 31, 1986 (Inception) to December 31, 1998, in conformity with
generally accepted accounting principles.
Paul M. Healey, CPA
F-1
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31,
-----------------------------------
1998 1997
----------------- --------------
CURRENT ASSETS
Cash $ 780 $ 0
================= ==============
CURRENT LIABILITIES
Accrued Taxes 7,580 7,580
Accounts Payable 2,000 6,000
----------------- --------------
TOTAL LIABILITIES 9,580 13,580
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, Authorized 50,000,000 Shares at
$.001 Par Value, 500,000 and 446,940 Shares Issued
and Outstanding, respectively 500 447
Additional Paid In Capital 795,321 778,254
Retained Deficits (804,621) (792,281)
----------------- ---------------
TOTAL STOCKHOLDERS' DEFICIT (8,800) (13,580)
----------------- ---------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 780 $ 0
================= ===============
</TABLE>
See accountants' audit report and notes to financial statements.
F-2
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
July 31, 1986
(Inception) to
December 31,
1998 1997 1996 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0 $ 78,000
OPERATING EXPENSES
Advertising & Promotional 0 0 0 5,031
Engineering & Development 0 0 0 85,135
Insurance 0 0 0 4,676
Travel & Entertainment 452 0 0 29,315
Outside Services 0 0 0 127,199
Rent 0 0 0 22,395
Payroll 0 0 0 204,045
Payroll Taxes 0 0 0 19,679
Telephone 0 0 0 14,729
Office 132 0 0 11,169
Engineering Supplies 0 0 0 12,763
Other 636 0 0 10,551
Patent Expenses 0 0 0 10,380
Professional 11,120 6,000 0 34,909
Depreciation & Amortization 0 0 0 32,032
Loss on Abandonment 0 0 0 29,979
Bad Loan Write Off 0 0 0 228,634
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 12,340 6,000 0 882,621
------------ ------------ ------------ ------------
NET INCOME (LOSS) (12,340) (6,000) 0 (804,621)
RETAINED (DEFICIT) BEGINNING OF
PERIOD (792,281) (786,281) (786,281) 0
------------ ------------ ------------ ------------
RETAINED DEFICIT END OF PERIOD $(804,621) $(792,281) $ (786,281) $ (804,621)
============ ============ ============ ============
</TABLE>
See accountants' audit report and notes to financial statements.
F-3
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JULY 31, 1986
(INCEPTION)
TO
DECEMBER 31,
1998 1997 1996 1998
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY
OPERATIONS
Net Income (Loss) $(12,340) $(6,000) $0 $(804,621)
Increase (Decrease):
Other Assets 0 0 0 0
Accrued Expenses 0 0 0 7,580
Accounts Payable (4,000) 6,000 0 2,000
--------- --------- --------- -------------
Net Cash Flow (Outlay)
From Operations (16,340) 0 0 (795,041)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds From:
Sale of Common Stock 53 0 0 500
Paid in Capital 17,067 0 0 795,321
--------- --------- --------- -------------
17,120 0 0 795,821
--------- --------- --------- -------------
NET INCREASE (DECREASE)
IN CASH 780 0 0 780
CASH AT THE BEGINNING OF
PERIOD 0 0 0 0
--------- --------- --------- -------------
CASH AT END OF PERIOD $ 780 $ 0 $0 $ 780
--------- --------- --------- -------------
--------- --------- --------- -------------
</TABLE>
See accountants' audit report and notes to financial statements.
F-4
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998
AND FROM THE PERIOD JULY 31, 1986 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
--------------------------- Paid-In Development
Shares Amount Capital Stage
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Sale Stock - Insiders
July 31, 1986 11,394 $11 $22,777
Deficit 1986 (152)
---------- ---------- ---------- -----------
Balance December 31, 1986 11,394 11 22,777 (152)
Sale Stock - Insiders
April 10, 1987 7,750 8 15,492
Issuance Stock - Insiders
Technology Rights 130,000 130 (130)
Sale Stock - Public
October 2, 1987 20,150 20 201,480
Sale Stock - Public
November 2, 1987 24,500 24 179,433
Exercise Stock Warrants
December 17, 1987 406 1 6,093
Issuance Stock - Services
December 27, 1987 28,000 28 55,972
Deficit 1987 (103,524)
---------- ---------- ---------- -----------
Balance December 31, 1987 222,200 222 481,117 (103,676)
Exercise Stock Warrants
February 1, 1988 2,240 2 30,654
Deficit 1988 (188,157)
---------- ---------- ---------- -----------
Balance December 31, 1988 224,440 224 511,771 (291,833)
Deficit 1989 (359,617)
---------- ---------- ---------- -----------
Balance December 31, 1989 224,440 224 511,771 (651,450)
Issuance Stock
Debt Exchange 50,000 50 99,950
Deficit 1990 (9,108)
---------- ---------- ---------- -----------
Balance December 31, 1990 274,440 274 611,721 (660,558)
Deficit 1991 (159)
---------- ---------- ---------- -----------
</TABLE>
See accountants' audit report and notes to financial statements.
F-5
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998
AND FROM THE PERIOD JULY 31, 1986 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Balance December 31, 1991 274,440 274 611,721 (660,717)
Deficit 1992 (85)
---------- ---------- ---------- -----------
Balance December 31, 1992 274,440 274 611,721 (660,802)
Issue Stock
Technology Acquisition 30,000 30 2,970
Issue Stock
Technology Acquisition 9,500 10 940
Issue Stock
Debt Exchange 50,000 50 49,092
Deficit 1993 (335)
---------- ---------- ---------- -----------
Balance December 31, 1993 363,940 364 664,723 (661,137)
Issue Stock
Technology Acquisition 30,000 30 (30)
Insider Loans Payable Forgiven 97,253
Deficit 1994 (114,047)
---------- ---------- ---------- -----------
Balance December 31, 1994 393,940 394 761,946 (775,184)
Issuance Stock
Stock Issuance
Services 53,000 53 (53)
Debt Forgiveness Insider to
Paid In Capital 16,361
Deficit 1995 (11,097)
---------- ---------- ---------- -----------
Balance December 31, 1995 446,940 447 778,254 (786,281)
Deficit 1996
---------- ---------- ---------- -----------
Balance December 31, 1996 446,940 447 778,254 (786,281)
Deficit 1997 (6,000)
---------- ---------- ---------- -----------
Balance December 31, 1997 446,940 447 778,254 (792,281)
Stock Issuance Services 171,198 171 16,949
Stock Cancellations (118,138) (118) 118
Deficit 1998 (12,340)
Balance December 31, 1998 500,000 $500 $795,321 $(804,621)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
</TABLE>
See accountants' audit report and notes to financial statements.
F-6
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
NOTE 1 -- ACCOUNTING POLICIES
Organization of the Company
Breakthrough Electronics, Inc., formerly Golden Queens Mining Company, was
incorporated on July 31, 1986 under the laws of the' State of Nevada. The
Company changed its name to Breakthrough Electronics, Inc. on June 10, 1987.
The change was in response to the Company's new business focus of developing an
electronic telephone screening device then known as "Phoneguard". Phoneguard
was acquired through the issuance of common stock with no acquisition cost
assigned. The Company is still in the development stage, as it has virtually no
revenue to date.
The Company is authorized to issue up to 50,000,000 shares of common stock,
$.001 par value. Over the years, the Company has raised capital under both
public offerings as well as private stock sales. The Company intended to
utilize capital raised to complete the research and development of Phoneguard,
and then implement a marketing plan thereafter. As of the reporting date, the
Company has expended all of the capital raised, without completing the intended
task. As of the reporting date, the Company has ceased any and all operations,
and its technology has rapidly become outdated. Currently, the Company's sole
business focus, is the contemplation of acquiring, or being acquired by, an
existing company via either purchase or merger. The Company has begun
preliminary discussions with potential candidate companies, but has not as of
the date of this report come to any contractual arrangement.
The financial statements reflect certain capital equipment items which have
been fully expensed either from previous depreciation expense or loss on asset
abandonment. The total original expenditures for all capital equipment has been
included in losses to date, and is not segregated in the statement of cash
flows.
F-7
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998 and 1997
NOTE 2 -- COMMON STOCK PUBLIC OFFERING
On October 2 and November 2, 1987 the Company completed a public offering
which raised $201,500 and $245,000 through the sale of 503,750 and 612,500 units
respectively. Each unit consisted of 4 shares of common stock and 1 warrant to
purchase common stock. on December 17, 1987, 162,500 warrants were exercised to
purchase 40,625 shares of common stock for a total of $ 6,094. Four warrants
entitled the shareholders to purchase 1 share of common stock at $.15 per share.
The Company incurred approximately $ 65,000 in costs related to this offering.
On December 28, 1987 the Company issued a Notice of Call of Warrants to the
shareholders. The call price of the warrant was $.001 per warrant. All
warrants which were not exercised or tendered back to the Company by February 1,
1988 expired.
On February 1, 1988, 895,976 warrants were exercised to purchase 223,994
shares of common stock for $30,656.
NOTE 3 -- INCOME TAXES
The company has the following net operating loss and research credit
carryforwards expiring as follows:
<TABLE>
<CAPTION>
Net Operating Loss Research Credit
<S> <C> <C>
December 31, 2001 $ 152 $
2002 105,804
2003 196,227 8,730
2004 114,047
</TABLE>
The company has filed annual corporate tax returns through the tax year
1993 only.
F-8
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
NOTE 4 GENERAL INFORMATION
The company entered into an agreement with Cipher Voice, Inc.,(CVI) whereby
it granted CVI an exclusive license to the use of the Company's Phoneguard
technology. The license agreement provided for a profit sharing arrangement
based on anticipated future sales of the Phoneguard. CVI also raised capital
through a public offering during 1994. The intent of CVI was to attempt to
complete the research and development of Phoneguard. As was the case with the
Company, CVI never completed its intended task, and expended all of its capital
and has ceased operations as of the reporting date. CVI has subsequently been
purchased by a third party unrelated company. Both the Company and CVI were
founded by Barry Rose, who at one time served as President of both CVI and the
Company.
It is uncertain, as of the issuance date of these financial statements, as
to the marketability or value of the research and development efforts of the
Company or CVI. Management has indicated that it feels that given the rapid
advancements ongoing in the technology field, as well as the passage of time,
that there is limited or no value to the technology. If the Company were to be
acquired by another entity, consideration should be given to any residual value
of the research and development to date.
During 1995, the company and Barry Rose agreed to an arrangement whereby
Rose returned 11,813,850 shares of common stock to the company in the form of
Treasury Stock.
During August 1998, the Company obtained consents from a majority of
stockholders authorizing a reverse split of the Company's Common Stock, on a
1 for 100 basis. The split became effective during February 1999. All
references to shares outstanding and earnings per share have been adjusted to
reflect the effect of the reverse split on a retroactive basis.
F-9
<PAGE>
ARTICLES OF INCORPORATION
OF
GOLDEN QUEENS MINING CO.
FIRST. The name of the corporation is:
GOLDEN QUEENS MINING CO.
SECOND: Its principal office in the State of Nevada is located at 8585
O'Hare Road, Las Vegas, Clark County, Nevada 89131. The name and address of
its resident agent is H. Barry Rose, 8585 O'Hare Road, Las Vegas, Nevada
89131.
THIRD. The nature of the business, or objects or purposes proposed to
be transacted , promoted or carried on are:
To engage in any lawful activity and to manufacture, purchase or
otherwise acquire, invest in, own, mortgage, pledge, sell, assign and
transfer or otherwise dispose of, trade, deal in and deal with goods, wares
and merchandise and personal property of every class and description.
To hold, purchase and convey real and personal estate and to mortgage or
lease any such real and personal estate with its franchises and to take the
same by devise or bequest.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage, or otherwise dispose of letters patent of the United States or
anv foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trade-marks and trade names, relating
to or useful in connection with any business of this corporation.
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge
or otherwise dispose of the shares of the capital stock of or any bonds,
securities or evidences of the indebtedness created by any other corporation
or corporations of this state, or any other state or government, and, while
owner of such stock, bonds, securities or evidences of indebtedness, to
exercise all the rights, powers and privileges of ownership, including the
right to
<PAGE>
vote, if any.
To borrow money and contract debts when necessary for the transaction of
its business, or for the exercise of its corporate rights, privileges or
franchises, or for any other lawful purpose of its incorporation; to issue
bonds, promissory notes, bills of exchange, debentures, and other obligations
and evidences of indebtedness, payable at specified time or times , or
payable upon the happening of a specified event or events, whether secured by
mortgages pledge or otherwise, or unsecured, for money borrowed, or in
payment for property purchased, or acquired, or for any other lawful objects.
To purchase, hold, sell and transfer shares of its own capital stock,
and use therefor its capital, capital surplus, surplus, or other property or
funds; provided it shall not use its funds or property for the purchase of
its own shares of capital stock when such use would cause any impairment of
its capital; and provided further, that shares of its own capital stock
belonging to it shall not be voted upon, directly or indirectly, nor counted
as outstanding, for the purpose of computing any stockholders' quorum or vote.
To conduct business, have one or more offices, and hold, purchase,
mortgage and convey real and personal property in this state, and in any of
the several states, territories, possessions and dependencies of the United
States, the District of Columbia, and in any foreign countries.
To do all and everything necessary and proper for the accomplishment of
the objects hereinbefore enumerated or necessary or incidental to the
protection and benefit of the corporation, and, in general , to carry on any
lawful business necessary or incidental to the attainment of the objects of
the corporation, whether or not such business is similar in nature to the
objects hereinbefore set forth.
The objects and purposes specified in the foregoing clauses shall,
except where otherwise expressed, be in nowise limited or restricted by
reference to, or inference from, the terms of any other clause in these
articles of incorporation, but the objects and purposes specified in each of
the foregoing clauses of this article shall be regarded as independent
objects and purposes.
FOURTH. The amount of the total authorized capital stock of the
corporation is Twenty Five Thousand Dollars ($25,000.00) consisting of Twenty
Five Million (25,000,000) shares of stock of the par value of One Tenth of a
Cent ($.001) each.
2
<PAGE>
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the by-laws of this
corporation, provided that the number of directors shall not be reduced to
less than three (3) , except that in cases where all the shares of the
corporation are owned beneficially and of record by either one or two
stockholders, the number of directors may be less than three (3) but not less
than the number of stockholders.
The names and post-office addresses of the first board of directors,
which shall be Five in number, are as follows:
<TABLE>
<CAPTION>
NAME POST OFFICE ADDRESS
<S> <C>
H. Barry Rose 8585 O'Hare Road
Las Vegas, NV 89131
Robert P. Branch 1506 Mancha Drive
Boulder City, NV 89050
Donald L. Laughlin 2596 Stratford Avenue
Las Vegas, NV 89121
Frank T. Fox 439 North 600 West
Cedar City, UT 84720
Ben Goldfarb 2016 Pine Knoll Drive
Walnut Creek, CA 94595
</TABLE>
SIXTH. The name and post-office address of each of the incorporators
signing the articles of incorporation are as follows:
<TABLE>
<CAPTION>
NAME POST-OFFICE ADDRESS
<S> <C>
Patrick J. Fitzgibbon 1700 Broadway
Denver, Colorado 80290
Carol M. Carpenter 1700 Broadway
Denver, Colorado 80290
Barbara A. Sena 1700 Broadway
Denver,, Colorado 80290
</TABLE>
SEVENTH. The corporation is to have perpetual existence.
EIGHTH. In furtherance, and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized:
Subject to the by-laws, if any, adopted by the stockholders, to make,
alter or amend the by-laws o.f the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to
3
<PAGE>
authorize and cause to be executed mortgages and liens upon the real and
personal property of this corporation. By resolution passed by a -majority of
the whole board, to designate one (1) or more committees, each committee to
consist of one (1) or more of the directors of the corporation, which, to the
extent provided in the resolution or in the by-laws of the corporation, shall
have and may exercise the powers of the board of directors in the management
of the business and affairs of the corporation, and may authorize the seal of
the corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be stated in the
by-laws of the corporation or as may be determined from time to time by
resolution adopted by the board of directors.
When and as authorized by the affirmative vote Of stockholders holding
stock entitling them to exercise at 1 e a s t a majority of the voting power
given at a stockholders' meeting called for that purpose . , or when
authorized by the written consent of the holders of at least a majority of
the voting stock issued and outstanding, the board of directors shall have
power and authority at any meeting to sell, lease or exchabge all of the
property and assets of the corporation, including its good will and its
corporate franchises, upon such terms and conditions as its board of
directors deem expedient and for the best interests of the corporation.
NINTH. Meetings of stockholders may be held outside the State of
Nevada, if the by-laws so provide. The books of the corporation may be kept
- -(subject to any provision contained in the statutes) -outside the State of
Nevada at such place or places as may be designated f rom time to time by the
board of directors or in the by-laws; of the corporation.
TENTH. This corporation reserves the right to amend, alter, change or
repeal any provision contained in the articles of incorporation, in the
manner nOw or hereafter prescribed by statute, or by the articles Of
incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
ELEVENTH: No shareholder shall have the right to cumulative voting at
elections of directors.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation
Law of the State of Nevada, and make and file these articles of
incorporation, hereby declaring and certifying that the facts herein stated
are true, and accordingly have hereunto set our hands this 29th day of July,
1986.
4
<PAGE>
/s/ Patrick J. Fitzgibbon
-----------------------------------
Patrick J. Fitzgibbon
/s/ Carol M. Carpenter
-----------------------------------
Carol M. Carpenter
/s/ Barbara A. Sena
-----------------------------------
Barbara A. Sena
STATE OF Colorado
COUNTY OF Denver
On this 29th day of July, 1 9 8 6 ,before me, a Notary Public,
personally appeared Patrick J. Fitzgibbon, Carol M. Carpenter and Barbara A.
Sena, who severally acknowledged that they executed the above instrument.
/s/
-----------------------------------
Notary Public
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BYLAWS
OF
BREAKTHROUGH ELECTRONICS, INC.
A NEVADA CORPORATION
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TABLE OF CONTENTS
Page
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ARTICLE I OFFICES 1
Section 1.01 Registered Office 1
Section 1.02 Locations of Office 1
ARTICLE II SHAREHOLDERS 1
Section 2.01 Annual Meeting 1
Section 2.02 Special Meeting 1
Section 2.03 Place of Meetings 1
Section 2.04 Notice of Meetings 1
Section 2.05 Waiver of Notice 2
Section 2.06 Fixing Record Date 2
Section 2.07 Voting Lists 2
Section 2.08 Quorum 2
Section 2.09 Vote Required 3
Section 2.10 Voting on Stock 3
Section 2.11 Proxies 3
Section 2.12 Written Consent to Action by Stockholders 3
Section 2.13 Control Share Provision 3
ARTICLE III DIRECTORS 4
Section 3.01 Number, Term, and Qualifications 4
Section 3.02 Vacancies and Newly Created Directorships 4
Section 3.03 General Powers 4
Section 3.04 Regular Meetings 4
Section 3.05 Special Meetings 4
Section 3.06 Meetings by Telephone Conference Call 4
Section 3.07 Notice 4
Section 3.08 Quorum 5
Section 3.09 Manner of Acting 5
Section 3.10 Compensation 5
Section 3.11 Presumption of Assent 5
Section 3.12 Resignations 5
Section 3.13 Written Consent to Action by Directors 5
Section 3.14 Removal 5
ARTICLE IV OFFICERS 5
Section 4.01 Numbers 5
Section 4.02 Election, Term of Office, and Qualification 6
Section 4.03 Subordinate Officers, Etc. 6
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Section 4.04 Resignation 6
Section 4.05 Removal 6
Section 4.06 Vacancies and Newly Created Offices 6
Section 4.07 The Chairman of the Board 6
Section 4.08 The President 6
Section 4.09 The Vice Presidents 7
Section 4.10 The Secretary 7
Section 4.11 The Treasurer 8
Section 4.12 General Manager 8
Section 4.13 Salaries 9
Section 4.14 Surety Bonds 9
ARTICLE V EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
AND DEPOSIT OF CORPORATE FUNDS 9
Section 5.01 Execution Instrument 9
Section 5.02 Loans 9
Section 5.03 Deposits 9
Section 5.04 Checks, Drafts, Etc. 10
Section 5.05 Bonds and Debentures 10
Section 5.06 Sale, Transfer, Etc. of Securities 10
Section 5.07 Proxies 10
ARTICLE VI CAPITAL STOCK 10
Section 6.01 Stock Certificates 10
Section 6.02 Transfer of Stock 11
Section 6.03 Regulations 11
Section 6.04 Maintenance of Stock Ledger at Principal
Place of Business 11
Section 6.05 Transfer Agents and Registrars 11
Section 6.06 Closing of Transfer Books and Fixing of Record Date 11
Section 6.07 Lost or Destroyed Certificates 12
ARTICLE VII EXECUTIVE COMMITTEE AND OTHER COMMITTEES 12
Section 7.01 How Constituted 12
Section 7.02 Powers 12
Section 7.03 Proceedings 12
Section 7.04 Quorum and Manner of Acting 12
Section 7.05 Resignations 13
Section 7.06 Removal 13
Section 7.07 Vacancies 13
Section 7.08 Compensation 13
ARTICLE VIII INDEMNIFICATION, INSURANCE, AND OFFICER
AND DIRECTOR CONTRACT 13
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Section 8.01 Indemnification: Third Party Actions 13
Section 8.02 Indemnification: Corporate Actions 13
Section 8.03 Determination 14
Section 8.04 Advances 14
Section 8.05 Scope of Indemnification 14
Section 8.06 Insurance 15
Section 8.07 Officer and Director Contracts 15
ARTICLE IX FISCAL YEAR 16
ARTICLE X DIVIDENDS 16
ARTICLE XI AMENDMENTS 16
CERTIFICATE OF SECRETARY 16
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BYLAWS
OF
BREAKTHROUGH ELECTRONICS, INC.
ARTICLE I
OFFICES
SECTION 1.01 REGISTERED OFFICE. The registered office shall be in
the city of Reno, county of Washoe, state of Nevada.
SECTION 1.02 LOCATIONS OF OFFICES. The corporation may also have
offices at such other places both within and without the state of Nevada as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 2.01 ANNUAL MEETING. The annual meeting of the stockholders
shall be held on the second Tuesday of the third month following the
anniversary of incorporation or at such other time designated by the board of
directors and as is provided for in the notice of the meeting, PROVIDED, that
whenever such date falls on a legal holiday, the meeting shall be held on the
next succeeding business day, beginning with the year following the filing of
the articles of incorporation, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting. If
the election of directors shall not be held on the day designated herein for
the annual meeting of the stockholders, or at any adjournment thereof, the
board of directors shall cause the election to be held at a special meeting
of the stockholders as soon thereafter as may be convenient.
SECTION 2.02 SPECIAL MEETINGS. Special meetings of the stockholders
may be called at any time by the chairman of the board, the president, or by
the board of directors, or in their absence or disability, by a vice
president.
SECTION 2.03 PLACE OF MEETINGS. The board of directors may designate
any place, either within or without the state of incorporation, as the place
of meeting for any annual meeting or for any special meeting called by the
board of directors. A waiver of notice signed by all stockholders entitled
to vote at a meeting may designate any place, either within or without the
state of incorporation, as the place for the holding of such meeting. If no
designation is made, the place of meeting shall be at the principal office of
the corporation.
SECTION 2.04 NOTICE OF MEETINGS. The secretary or assistant
secretary, if any, shall cause notice of the time, place and purpose or
purposes of all meetings of the stockholders (whether annual or special), to
be mailed at least ten days, but not more than sixty days, prior to the
meeting, to each stockholder of record entitled to vote.
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SECTION 2.05 WAIVER OF NOTICE. Any stockholder may waive notice of
any meeting of stockholders (however called or noticed, whether or not called
or noticed and whether before, during, or after the meeting), by signing a
written waiver of notice or a consent to the holding of such meeting, or an
approval of the minutes thereof. Attendance at a meeting, in person or by
proxy, shall constitute waiver of all defects of notice regardless of whether
waiver, consent, or approval is signed or any objections are made, unless
attendance is solely for the purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. All such waivers, consents, or approvals shall
be made a part of the minutes of the meeting.
SECTION 2.06 FIXING RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in
writing without a meeting, or stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect to any change, conversion, or exchange of
stock, or for the purpose of any other lawful action, the board of directors
may fix in advance a date as the record date for any such determination of
stockholders, such date in any case to be not more than sixty days and, in
case of a meeting of stockholders, not less than ten days prior to the date
on which the particular action requiring such determination of stockholders
is to be taken. If no record date is fixed for the determination of
stockholders entitled to notice of or to vote at a meeting, the day preceding
the date on which notice of the meeting is mailed shall be the record date.
For any other purpose, the record date shall be the close of business on the
date on which the resolution of the board of directors pertaining thereto is
adopted. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof. Failure to comply with
this section shall not affect the validity of any action taken at a meeting
of stockholders.
SECTION 2.07 VOTING LISTS. The officers of the corporation shall
cause to be prepared from the stock ledger at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at such meeting or any adjournment thereof, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to
the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
The original stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section, or the books of the corporation, or to vote in person or by proxy at
any meeting of stockholders.
SECTION 2.08 QUORUM. Stock representing one-half of the voting power
of all outstanding stock of the corporation entitled to vote, present in
person or represented by proxy, shall constitute a quorum at all meetings of
the stockholders for the transaction of business, except as otherwise
provided by statute or by the articles of incorporation. If, however, such
quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might
have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the
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adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
SECTION 2.09 VOTE REQUIRED. Except as provided in section 3.01 of
these bylaws regarding election of directors, when a quorum is present at any
meeting, the vote of the holders of stock having a majority of the voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one on which by express
provision of the statutes of the state of Nevada or of the articles of
incorporation a different vote is required, in which case such express
provision shall govern and control the decision of such question.
SECTION 2.10 VOTING OF STOCK. Unless otherwise provided in the
articles of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, subject to
the modification of such voting rights of any class or classes of the
corporation's capital stock by the articles of incorporation.
SECTION 2.11 PROXIES. At each meeting of the stockholders, each
stockholder entitled to vote shall be entitled to vote in person or by proxy,
PROVIDED, however, that the right to vote by proxy shall exist only in case
the instrument authorizing such proxy to act shall have been executed in
writing by the registered holder or holders of such stock, as the case may
be, as shown on the stock ledger of the corporation or by his attorney
thereunto duly authorized in writing. Such instrument authorizing a proxy to
act shall be delivered at the beginning of such meeting to the secretary of
the corporation or to such other officer or person who may, in the absence of
the secretary, be acting as secretary of the meeting. In the event that any
such instrument shall designate two or more persons to act as proxy, a
majority of such persons present at the meeting, or, if only one be present,
that one shall (unless the instrument shall otherwise provide) have all of
the powers conferred by the instrument upon all persons so designated.
Persons holding stock in a fiduciary capacity shall be entitled to vote the
stock so held, and the persons whose shares are pledged shall be entitled to
vote, unless the transfer by the pledgor in the books of the corporation he
shall have expressly empowered the pledgee to vote thereon, in which case the
pledgee, or his proxy, may represent such stock and vote thereon. No proxy
shall be voted or acted on after three years from its date, unless the proxy
provides for a longer period.
SECTION 2.12 WRITTEN CONSENT TO ACTION BY STOCKHOLDERS. Unless
otherwise provided in the articles of incorporation, any action required to
be taken at any annual or special meeting of stockholders of the corporation,
or any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice, and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by all of the holders of outstanding stock 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.
SECTION 2.13 CONTROL SHARE PROVISION. The provisions of sections
78.378 to 78.3793 of the Nevada Revised Statutes, or any successor provisions
thereof, pertaining to the acquisition of a controlling interest in the
corporation shall not apply to the corporation or the acquisition of a
controlling interest by any person.
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ARTICLE III
DIRECTORS
SECTION 3.01 NUMBER, TERM, AND QUALIFICATIONS. The number of directors
which shall constitute the whole board shall be not less than one nor more than
nine. Within the limits above specified, the number of directors shall be
determined by resolution of the board of directors or by the stockholders at the
annual meeting of the stockholders or a special meeting called for such purpose,
except as provided in section 3.02 of this article, and each director elected
shall hold office until his successor is elected and qualified. Directors need
not be residents of the state of incorporation or stockholders of the
corporation.
SECTION 3.02 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify. If there are no directors in office, then an
election of directors may be held in the manner provided by statute.
SECTION 3.03 GENERAL POWERS. The business of the corporation shall be
managed under the direction of its board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by statute, the articles of incorporation, or bylaws directed or required to be
exercised or done by the stockholders.
SECTION 3.04 REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately
following, and at the same place as, the annual meeting of shareholders. The
board of directors may provide by resolution, the time and place either within
or without the state of incorporation, for the holding of additional regular
meetings without other notice than such resolution.
SECTION 3.05 SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the chairman of the board,
president, vice president or any two directors. The person or persons
authorized to call special meetings of the board of directors may fix any place,
either within or without the state of incorporation, as the place for holding
any special meeting of the board of directors called by them.
SECTION 3.06 MEETINGS BY TELEPHONE CONFERENCE CALL. Members of the
board of directors may participate in a meeting of the board of directors or a
committee of the board of directors by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
SECTION 3.07 NOTICE. Notice of any special meeting shall be given at
least five days prior thereto by written notice delivered personally or mailed
to each director at his regular business address or residence, or by telegram.
If mailed, such notice shall be deemed to be delivered when deposited in United
States mail so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any director may waive notice of any
meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting solely for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
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SECTION 3.08 QUORUM. A majority of the number of directors shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, but if less than a majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time without further
notice.
SECTION 3.09 MANNER OF ACTING. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, and individual directors shall have no power as such.
SECTION 3.10 COMPENSATION. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 3.11 PRESUMPTION OF ASSENT. A director of the corporation who
is present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting, unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof, or shall forward such
dissent by registered or certified mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
SECTION 3.12 RESIGNATIONS. A director may resign at any time by
delivering a written resignation to either the president, a vice president, the
secretary or assistant secretary, if any. The resignation shall become
effective on its acceptance by the board of directors; provided, that if the
board has not acted thereon within ten days from the date presented, the
resignation shall be deemed accepted.
SECTION 3.13 WRITTEN CONSENT TO ACTION BY DIRECTORS. Any action
required to be taken at a meeting of the directors of the corporation or any
other action which may be taken at a meeting of the directors or of a committee,
may be taken without a meeting, if a consent in writing, setting forth the
action so taken, shall be signed by all of the directors, or all of the members
of the committee, as the case may be. Such consent shall have the same legal
effect as a unanimous vote of all the directors or members of the committee.
SECTION 3.14 REMOVAL. At a meeting expressly called for that purpose,
one or more directors may be removed by a vote of a majority of the shares of
outstanding stock of the corporation entitled to vote at an election of
directors.
ARTICLE IV
OFFICERS
SECTION 4.01 NUMBER. The officers of the corporation shall be a
president, a secretary, a treasurer, and such other officers as may be appointed
by the board of directors, including, a chairman of the board, one or more vice
presidents, an assistant secretary, an assistant treasurer, or a general
manager.
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SECTION 4.02 ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers
shall be chosen by the board of directors annually at its annual meeting. In
the event of failure to choose officers at an annual meeting of the board of
directors, officers may be chosen at any regular or special meeting of the board
of directors. Each such officer (whether chosen at an annual meeting of the
board of directors to fill a vacancy or otherwise) shall hold his office until
the next ensuing annual meeting of the board of directors and until his
successor shall have been chosen and qualified, or until his death or until his
resignation or removal in the manner provided in these bylaws. Any one person
may hold any two or more of such offices. No person holding two or more offices
shall act in or execute any instrument in the capacity of more than one office.
The chairman of the board, if any, shall be and remain director of the
corporation during the term of his office. No other officer need be a director.
SECTION 4.03 SUBORDINATE OFFICERS, ETC. The board of directors from
time to time may appoint such other officers or agents as it may deem advisable,
each of whom shall have such title, hold office for such period, have such
authority and perform such duties as the board of directors from time to time
may determine. The board of directors from time to time may delegate to any
officer or agent the power to appoint any such subordinate officer or agents and
to prescribe their respective titles, terms of office, authorities and duties.
Subordinate officers need not be stockholders or directors.
SECTION 4.04 RESIGNATIONS. Any officer may resign at any time by
delivering a written resignation to the board of directors, the president, or
the secretary. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
SECTION 4.05 REMOVAL. Any officer may be removed from office at any
special meeting of the board of directors called for that purpose or at a
regular meeting, by the vote of a majority of the directors, with or without
cause. Any officer or agent appointed in accordance with the provisions of
section 4.03 hereof may also be removed, either with or without cause, by any
officer upon whom such power of removal shall have been conferred by the board
of directors.
SECTION 4.06 VACANCIES AND NEWLY CREATED OFFICES. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or any other cause, or if a new office shall be created, then such vacancies or
newly created offices may be filled by the board of directors at any regular or
special meeting.
SECTION 4.07 THE CHAIRMAN OF THE BOARD. The chairman of the board, if
there be such an officer, shall have the following powers and duties:
(a) He shall preside at all stockholders' meetings;
(b) He shall preside at all meetings of the board of directors;
and
(c) He shall be a member of the executive committee, if any.
SECTION 4.08 THE PRESIDENT. The president shall have the following
powers and duties:
(a) If no general manager has been appointed, he shall be the
chief executive officer of the corporation, and, subject to the direction
of the board of directors, shall have general charge of the business,
affairs and property of the corporation and general supervision over its
officers,
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employees and agents;
(b) If no chairman of the board has been chosen, or if such
officer is absent or disabled, he shall preside at meetings of the
stockholders and board of directors;
(c) He shall be a member of the executive committee, if any;
(d) He shall be empowered to sign certificates representing stock
of the corporation, the issuance of which shall have been authorized by
the board of directors; and
(e) He shall have all power and perform all duties normally
incident to the office of a president of a corporation and shall exercise
such other powers and perform such other duties as from time to time may
be assigned to him by the board of directors.
SECTION 4.09 THE VICE PRESIDENTS. The board of directors may, from time
to time, designate and elect one or more vice presidents, one of whom may be
designated to serve as executive vice president. Each vice president shall have
such powers and perform such duties as from time to time may be assigned to him
by the board of directors or the president. At the request or in the absence or
disability of the president, the executive vice president or, in the absence or
disability of the executive vice president, the vice president designated by the
board of directors or (in the absence of such designation by the board of
directors) by the president, as senior vice president, 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 on, the president.
SECTION 4.10 THE SECRETARY. The secretary shall have the following
powers and duties:
(a) He shall keep or cause to be kept a record of all of the
proceedings of the meetings of the stockholders and of the board of
directors in books provided for that purpose;
(b) He shall cause all notices to be duly given in accordance
with the provisions of these bylaws and as required by statute;
(c) He shall be the custodian of the records and of the seal of
the corporation, and shall cause such seal (or a facsimile thereof) to be
affixed to all certificates representing stock of the corporation prior
to the issuance thereof and to all instruments, the execution of which on
behalf of the corporation under its seal shall have been duly authorized
in accordance with these bylaws, and when so affixed he may attest the
same;
(d) He shall see that the books, reports, statements,
certificates and other documents and records required by statute are
properly kept and filed;
(e) He shall have charge of the stock ledger and books of the
corporation and cause the such books to be kept in such manner as to show
at any time the amount of the stock of the corporation of each class
issued and outstanding, the manner in which and the time when such stock
was paid for, the names alphabetically arranged and the addresses of the
holders of record thereof, the amount of stock held by each holder and
time when each became such holder of record; and he shall exhibit at all
reasonable times to any director, on application, the original or
duplicate stock ledger. He shall cause the stock ledger referred to in
section 6.04 hereof to be kept
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and exhibited at the principal office of the corporation, or at such
other place as the board of directors shall determine, in the manner
and for the purpose provided in such section;
(f) He shall be empowered to sign certificates representing
stock of the corporation, the issuance of which shall have been
authorized by the board of directors; and
(g) He shall perform in general all duties incident to the
office of secretary and such other duties as are given to him by these
bylaws or as from time to time may be assigned to him by the board of
directors or the president.
SECTION 4.11 THE TREASURER. The Treasurer shall have the following
powers and duties:
(a) He shall have charge and supervision over and be
responsible for the monies, securities, receipts and disbursements of the
corporation;
(b) He shall cause the monies and other valuable effects of the
corporation to be deposited in the name and to the credit of the
corporation in such banks or trust companies or with such banks or other
depositories as shall be selected in accordance with section 5.03 hereof;
(c) He shall cause the monies of the corporation to be
disbursed by checks or drafts (signed as provided in section 5.04 hereof)
drawn upon the authorized depositories of the corporation, and cause to
be taken and preserved property vouchers for all monies disbursed;
(d) He shall render to the board of directors or the president,
whenever requested, a statement of the financial condition of the
corporation and of all of his transactions as treasurer, and render a
full financial report at the annual meeting of the stockholders, if
called on to do so;
(e) He shall cause to be kept correct books of account of all
the business and transactions of the corporation and exhibit such books
to any directors on request during business hours;
(f) He shall be empowered from time to time to require from all
officers or agents of the corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the corporation; and
(g) He shall perform in general all duties incident to the
office of treasurer and such other duties as are given to him by these
bylaws or as from time to time may be assigned to him by the board of
directors or the president.
SECTION 4.12 GENERAL MANAGER. The board of directors may employ and
appoint a general manager who may, or may not, be one of the officers or
directors of the corporation. The general manager, if any, shall have the
following powers and duties:
(a) He shall be the chief executive officer of the corporation
and, subject to the directions of the board of directors, shall have
general charge of the business affairs and property of the corporation
and general supervision over its officers, employees and agents;
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(b) He shall have the exclusive management of the business of
the corporation and of all of its dealings, but at all times subject to
the control of the board of directors;
(c) Subject to the approval of the board of directors or the
executive committee, if any, he shall employ all employees of the
corporation, or delegate such employment to subordinate officers, or such
division chiefs, and shall have authority to discharge any person so
employed; and
(d) He shall make a report to the president and directors
quarterly, or more often if required to do so, setting forth the result
of the operations under his charge, together with suggestions looking to
the improvement and betterment of the condition of the corporation, and
shall perform such other duties as the board of directors shall require.
SECTION 4.13 SALARIES. The salaries or other compensation of the
officers of the corporation shall be fixed from time to time by the board of
directors except that the board of directors may delegate to any person or group
of persons the power to fix the salaries or other compensation of any
subordinate officers or the agents appointed in accordance with the provision of
section 4.03 hereof. No officer shall be prevented from receiving any such
salary or compensation by reason of the fact that he is also a director of the
corporation.
SECTION 4.14 SURETY BONDS. In case the board of directors shall so
require, any officer or agent of the corporation shall execute to the
corporation a bond in such sums and with such surety or sureties as the board of
directors may direct, conditioned upon the faithful performance of his duties to
the corporation, including responsibility for negligence and for the accounting
of all property, monies or securities of the corporation which may come into his
hands.
ARTICLE V
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY
AND DEPOSIT OF CORPORATE FUNDS
SECTION 5.01 EXECUTION OF INSTRUMENTS. Subject to any limitation
contained in the articles of incorporation or these bylaws, the president or any
vice president or the general manager, if any, may, in the name and on behalf of
the corporation, execute and deliver any contract or other instrument authorized
in writing by the board of directors. The board of directors may, subject to
any limitation contained in the articles of incorporation or in these bylaws,
authorize in writing any officer or agent to execute and deliver any contract or
other instrument in the name and on behalf of the corporation; any such
authorization may be general or confined to specific instances.
SECTION 5.02 LOANS. No loan or advance shall be contracted on behalf of
the corporation, no negotiable paper or other evidence of its obligation under
any loan or advance shall be issued in its name, and no property of the
corporation shall be mortgaged, pledged, hypothecated, transferred or conveyed
as security for the payment of any loan, advance, indebtedness or liability of
the corporation, unless and except as authorized by the board of directors. Any
such authorization may be general or confined to specific instances.
SECTION 5.03 DEPOSITS. All monies of the corporation not otherwise
employed shall be deposited
9
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from time to time to its credit in such banks or trust companies or with such
bankers or other depositories as the board of directors may select, or as
from time to time may be selected by any officer or agent authorized to do so
by the board of directors.
SECTION 5.04 CHECKS, DRAFTS, ETC. All notes, drafts, acceptances,
checks, endorsements, and, subject to the provisions of these bylaws, evidences
of indebtedness of the corporation shall be signed by such officer or officers
or such agent or agents of the corporation and in such manner as the board of
directors from time to time may determine. Endorsements for deposit to the
credit of the corporation in any of its duly authorized depositories shall be in
such manner as the board of directors from time to time may determine.
SECTION 5.05 BONDS AND DEBENTURES. Every bond and debenture issued by
the corporation shall be evidenced by an appropriate instrument which shall be
signed by the president or a vice president and by the secretary and sealed with
the seal of the corporation. The seal may be a facsimile, engraved or printed.
Where such bond or debenture is authenticated with the manual signature of an
authorized officer of the corporation or other trustee designated by the
indenture of trust or other agreement under which such security is issued, the
signature of any of the corporation's officers named thereon may be a facsimile.
In case any officer who signed, or whose facsimile signature has been used on
any such bond or debenture, shall cease to be an officer of the corporation for
any reason before the same has been delivered by the corporation, such bond or
debenture may nevertheless be adopted by the corporation and issued and
delivered as though the person who signed it or whose facsimile signature has
been used thereon had not ceased to be such officer.
SECTION 5.06 SALE, TRANSFER, ETC. OF SECURITIES. Sales, transfers,
endorsements and assignments of stocks, bonds and other securities owned by or
standing in the name of the corporation, and the execution and delivery on
behalf of the corporation of any and all instruments in writing incident to any
such sale, transfer, endorsement or assignment, shall be effected by the
president, or by any vice president, together with the secretary, or by any
officer or agent thereunto authorized by the board of directors.
SECTION 5.07 PROXIES. Proxies to vote with respect to stock of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the president or any vice
president and the secretary or assistant secretary of the corporation, or by any
officer or agent thereunder authorized by the board of directors.
ARTICLE VI
CAPITAL SHARES
SECTION 6.01 STOCK CERTIFICATES. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by the president or
any vice president and the secretary or assistant secretary, and sealed with the
seal (which may be a facsimile, engraved or printed) of the corporation,
certifying the number and kind, class or series of stock owned by him in the
corporation; PROVIDED, however, that where such a certificate is countersigned
by (a) a transfer agent or any assistant transfer agent, or (b) registered by a
registrar, the signature of any such president, vice president, secretary, or
assistant secretary may be a facsimile. In case any officer who shall have
signed, or whose facsimile signature or signatures shall have been used on any
such certificate, shall cease to be such officer of the corporation, for any
reason, before the delivery of such certificate by the corporation, such
certificate may nevertheless be adopted by
10
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the corporation and be issued and delivered as though the person who signed
it, or whose facsimile signature or signatures shall have been used thereon,
has not ceased to be such officer. Certificates representing stock of the
corporation shall be in such form as provided by the statutes of the state of
incorporation. There shall be entered upon the stock books of the
corporation at the time of issuance of each share, the number of the
certificate issued, the name and address of the person owning the stock
represented thereby, the number and kind, class or series of such stock and
the date of issuance thereof. Every certificate exchanged or returned to the
corporation shall be marked "cancelled" with the date of cancellation.
SECTION 6.02 TRANSFER OF STOCK. Transfers of stock of the corporation
shall be made on the books of the corporation by the holder of record thereof,
or by his attorney thereunto duly authorized by a power of attorney duly
executed in writing and filed with the secretary of the corporation or any of
its transfer agents, and on surrender of the certificate or certificates,
properly endorsed or accompanied by proper instruments of transfer, representing
such stock. Except as provided by law, the corporation and transfer agents and
registrars, if any, shall be entitled to treat the holder of record of any stock
as the absolute owner thereof for all purposes, and accordingly shall not be
bound to recognize any legal, equitable or other claim to or interest in such
stock on the part of any other person whether or not it or they shall have
express or other notice thereof.
SECTION 6.03 REGULATIONS. Subject to the provisions of the articles of
incorporation, the board of directors may make such rules and regulations as
they may deem expedient concerning the issuance, transfer, redemption and
registration of certificates for stock of the corporation.
SECTION 6.04 MAINTENANCE OF STOCK LEDGER AT PRINCIPAL PLACE OF BUSINESS.
A stock ledger (or books where more than one kind, class or series of stock is
outstanding) shall be kept at the principal place of business of the
corporation, or at such other place as the board of directors shall determine,
containing the names alphabetically arranged of original stockholders of the
corporation, their addresses, their interest, the amount paid on their shares,
and all transfers thereof and the number and class of stock held by each. Such
stock ledgers shall at all reasonable hours be subject to inspection by persons
entitled by law to inspect the same.
SECTION 6.05 TRANSFER AGENTS AND REGISTRARS. The board of directors may
appoint one or more transfer agents and one or more registrars with respect to
the certificates representing stock of the corporation, and may require all such
certificates to bear the signature of either or both. The board of directors
may from time to time define the respective duties of such transfer agents and
registrars. No certificate for stock shall be valid until countersigned by a
transfer agent, if at the date appearing thereon the corporation had a transfer
agent for such stock, and until registered by a registrar, if at such date the
corporation had a registrar for such stock.
SECTION 6.06 CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATE.
(a) The board of directors shall have power to close the stock
ledgers of the corporation for a period of not to exceed sixty days
preceding the date of any meeting of the stockholders, or the date for
payment of any dividend, or the date for the allotment of rights, or
capital stock shall go into effect, or a date in connection with
obtaining the consent of stockholders for any purpose.
11
<PAGE>
(b) In lieu of closing the stock ledgers as aforesaid, the
board of directors may fix in advance a date, not exceeding sixty days
preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go
into effect, or a date in connection with obtaining any such consent, as
a record date for the determination of the stockholders entitled to a
notice of, and to vote at, any such meeting and any adjournment thereof,
or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock or to give such consent.
(c) If the stock ledgers shall be closed or a record date set
for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for or such
record date shall be at least ten days immediately preceding such
meeting.
SECTION 6.07 LOST OR DESTROYED CERTIFICATES. The corporation may issue
a new certificate for stock of the corporation in place of any certificate
theretofore issued by it, alleged to have been lost or destroyed, and the board
of directors may, in their discretion, require the owner of the lost or
destroyed certificate or his legal representatives, to give the corporation a
bond in such form and amount as the board of directors may direct, and with such
surety or sureties as may be satisfactory to the board, to indemnify the
corporation and its transfer agents and registrars, if any, against any claims
that may be made against it or any such transfer agent or registrar on account
of the issuance of such new certificate. A new certificate may be issued
without requiring any bond when, in the judgment of the board of directors, it
is proper to do so.
ARTICLE VII
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 7.01 HOW CONSTITUTED. The board of directors may designate an
executive committee and such other committees as the board of directors may deem
appropriate, each of which committees shall consist of one or more directors.
Members of the executive committee and of any such other committee shall be
designated annually at the annual meeting of the board of directors; provided,
however, that at any time the board of directors may abolish or reconstitute the
executive committee and of any such other committee shall hold office until his
successor shall have been designated or until his resignation or removal in the
manner provided in these bylaws.
SECTION 7.02 POWERS. During the intervals between meetings of the board
of directors, the executive committee shall have and may exercise all powers of
the board of directors in the management of the business and affairs of the
corporation, except for the power to fill vacancies in the board of directors or
to amend these bylaws, and except for such powers as by law may not be delegated
by the board of directors to an executive committee.
SECTION 7.03 PROCEEDINGS. The executive committee, and such other
committees as may be designated hereunder by the board of directors, may fix its
own presiding and recording officer or officers, and may meet at such place or
places, at such time or times and upon such notice (or without notice) as it
shall determine from time to time. It will keep a record of its proceedings and
shall report such proceedings to the board of directors at the meeting of the
board of directors next following.
SECTION 7.04 QUORUM AND MANNER OF ACTING. At all meetings of the
executive committee, and
12
<PAGE>
of such other committees as may be designated hereunder by the board of
directors, the presence of members constituting a majority of the total
authorized membership of the committee shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a
majority of the members present at any meeting at which a quorum is present
shall be the act of such committee. The members of the executive committee,
and of such other committees as may be designated hereunder by the board of
directors, shall act only as a committee and the individual members thereof
shall have no powers as such.
SECTION 7.05 RESIGNATIONS. Any member of the executive committee, and
of such other committees as may be designated hereunder by the board of
directors, may resign at any time by delivering a written resignation to either
the president, the secretary, or assistant secretary, or to the presiding
officer of the committee of which he is a member, if any shall have been
appointed and shall be in office. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
SECTION 7.06 REMOVAL. The board of directors may at any time remove any
member of the executive committee or of any other committee designated by it
hereunder either for or without cause.
SECTION 7.07 VACANCIES. If any vacancy shall occur in the executive
committee or of any other committee designated by the board of directors
hereunder, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members shall, until the filling of such vacancy,
constitute the then total authorized membership of the committee and continued
to act, unless such committee consisted of more than one member prior to the
vacancy or vacancies and is left with only one member as a result thereof. Such
vacancy may be filled at any meeting of the board or directors.
SECTION 7.08 COMPENSATION. The board of directors may allow a fixed sum
and expenses of attendance to any member of the executive committee, or of any
other committee designated by it hereunder, who is not an active salaried
employee of the corporation for attendance at each meeting of the said
committee.
ARTICLE VIII
INDEMNIFICATION, INSURANCE, AND
OFFICER AND DIRECTOR CONTRACTS
SECTION 8.01 INDEMNIFICATION: THIRD PARTY ACTIONS. The corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceedings, whether civil, criminal, administrative, or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee, or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's fees, judgments, fines,
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit, or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or on a
plea of NOLO CONTENDERE or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best
13
<PAGE>
interests of the corporation, and with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
SECTION 8.02 INDEMNIFICATION: CORPORATE ACTIONS. The corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses, including attorney's
fees, actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be or not opposed to the best interests of the
corporation. Indemnification shall not be made for any claim, issue, or matter
as to which such a person shall have been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines on application that in view of
all circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
SECTION 8.03 DETERMINATION. To the extent that a director, officer,
employee, or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in sections
8.01 and 8.02 hereof, or in defense of any claim, issue, or matter therein, he
must be indemnified against expenses, including attorney's fees, actually and
reasonably incurred by him in connection the defense. Any indemnification
under sections 8.01 and 8.02, unless ordered by a court or advanced pursuant to
section 8.04, must be made by the corporation only as authorized in the specific
case on a determination that indemnification of the director, officer, employee,
or agent is proper in the circumstances. The determination must be made: (i) by
the board of directors by a majority vote of a quorum consisting of directors
who were not parties to the act, suit, or proceeding; (ii) if a majority vote of
a quorum consisting of directors who are not parties to the act, suit, or
proceeding so orders, by independent legal counsel in a written opinion; (iii)
if a quorum consisting of directors who are not parties to the act, suit, or
proceeding cannot be obtained, by independent legal counsel in a written
opinion; or (iv) by the stockholders by a majority vote of a quorum of
stockholders at any meeting duly called for such purpose.
SECTION 8.04 ADVANCES. Expenses incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation as they are
incurred and in advance of the final disposition of the action, suit, or
proceeding on receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
SECTION 8.05 SCOPE OF INDEMNIFICATION. The indemnification and
advancement of expenses authorized in or ordered by the corporation pursuant to
sections 8.01, 8.02, 8.04:
(a) does not exclude any other rights to which a person seeking
indemnification or advancement of expenses, including corporate personnel
other than directors or officers, may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise for either an action in his
official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court
14
<PAGE>
pursuant to section 8.02 or for the advancement of expenses made
pursuant to section 8.04, may not be made to or on behalf of any
director or officer if a final adjudication establishes that his acts
or omissions involved intentional misconduct, fraud, or a knowing
violation of law and was material to the case of action; and
(b) continues for a person who has ceased to be a director,
officer, employee, or agent and inures to the benefit of the heirs,
executors, and administrators of such a person.
SECTION 8.06 INSURANCE. The corporation may purchase and maintain
insurance or make other financial arrangements on behalf of any person who is or
was a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against any liability asserted against him and incurred by him in any
such capacity as a director, officer, employee, or agent, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against any such liability and expenses. The other financial arrangements
made by the corporation pursuant to this section 8.06 may include the creation
of a trust fund, the establishment of a program of self-insurance, the securing
of its obligation of indemnification by granting a security interest or other
lien on any assets of the corporation, the establishment of a letter of credit,
guarantee, or surety, all as may be determined by resolution of the board of
directors; PROVIDED, that no financial arrangement made pursuant to this section
8.06 may provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable for
intentional misconduct, fraud, or a knowing violation of law, except with
respect to the advancement of expenses or indemnification ordered by a court.
(a) Any insurance or other financial arrangement made on behalf
of a person pursuant to this section 8.06 may be provided by the
corporation or any other person approved by the board of directors, even
if all or part of the other person's stock or other securities is owned
by the corporation.
(b) In the absence of fraud, the decision of the board of
directors as to the propriety of the terms and conditions of any
insurance or other financial arrangement made pursuant to this section
8.06 and the choice of the person to provide the insurance or other
financial arrangement is conclusive, and the insurance or other financial
arrangement is not void or voidable and does not subject any director
approving it to personal liability for his action even if a director
approving the insurance or other financial arrangement is a beneficiary
of the insurance or other financial arrangement.
SECTION 8.07 OFFICER AND DIRECTOR CONTRACTS. No contract or other
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any corporation, firm, or association
in which one or more of the corporation's directors or officers are directors or
officers or are financially interested, is either void or voidable solely on the
basis of such relationship or solely because any such director or officer is
present at the meeting of the board of directors or a committee thereof which
authorized or approved the contract or transaction, or because the vote or votes
of common or interested directors are counted for such purpose, if:
(a) the fact the common directorship or financial interest is
disclosed or known to the
15
<PAGE>
board of directors or committee and noted in the minutes and the
board or committee authorizes, approves, or ratifies the contract or
transaction in good faith by a vote sufficient for the purpose
without counting the vote or votes of such director or directors;
(b) the fact that the common directorship or financial interest
is disclosed or known to the stockholders and they approve or ratify the
contract or transaction in good faith by a majority vote of the shares
voted at a meeting of stockholders called for such purpose or written
consent of stockholders holding a majority of the shares entitled to vote
(the votes of the common or interested directors or officers shall be
counted in any such vote of stockholders); or
(c) the contract or transaction is fair as to the corporation
at the time it is authorized or approved.
ARTICLES IX
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
ARTICLE X
DIVIDENDS
The board of directors may from time to time declare, and the corporation
may pay, dividends on its outstanding stock in the manner and upon the terms and
conditions provided by the articles of incorporation and by law.
ARTICLE XI
AMENDMENTS
All bylaws of the corporation, whether adopted by the board of directors
or the stockholders, shall be subject to amendment, alteration, or repeal, and
new bylaws may be made, except that no bylaw adopted or amended by the
stockholders shall be altered or repealed by the board of directors.
CERTIFICATE OF SECRETARY
The undersigned does hereby certify that he/she is the secretary of
Breakthrough Electronics, Inc., a corporation duly organized and existing under
and by virtue of the laws of the state of Nevada; that the above and foregoing
bylaws of said corporation were duly and regularly adopted as such by the board
of directors of said corporation by unanimous consent dated August 15, 1998, and
that the above and foregoing bylaws are now in full force and effect and
supersede and replace any prior bylaws of the corporation.
DATED this 1st day of September, 1998.
s/s Larry Grobstein
--------------------------
Larry Grobstein, Secretary
16
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