UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998
Commission file number 33-28417
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DENTMART GROUP, INC. (Formerly known as Elgin Corporation)
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(Exact name of Registrant as specified in charter)
Colorado 95-4585824
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(State or other jurisdic- (IRS Employer
tion of incorporation) Identification No.)
192 Searidge Court, Shell Beach, California 93449
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (805) 773-5350
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes___ No__X__
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
See "Security Ownership of Certain Beneficial Owners and Management."
$206,750 (Computed on the basis of $.36875 per share of Common Stock
as of April 13, 1998.)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
4,999,983 shares as of April 13, 1998
DOCUMENTS INCORPORATED BY REFERENCE
NONE
THE INDEX TO EXHIBITS IS FOUND ON PAGE 22.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
The Company was incorporated under the laws of the State of Delaware on
April 5, 1989 under the name Elgin Corporation. The Company was organized to
create a publicly held corporation vehicle suitable for merging with a privately
held corporation desirous of being publicly traded. The Company is in the early
developmental and promotional stages. The Company is not engaged in any
commercial operations, has no full-time employees and owns no real estate.
The Company filed a registration statement with the United States
Securities and Exchange Commission on Form S-18 that was declared effective on
November 30, 1989. The Company filed a certification and notice of suspension of
duty to file reports under Section 15(d) of the Securities Exchange Act of 1934
on Form 15 in February 1991. On February 8, 1991, the Company amended its
charter to change its name to DentMart Group, Inc. and on February 15, 1991, to
effect a change of domicile to Colorado, the Company merged with Dentmart Group,
Inc. which was incorporated in Colorado. The Company was not successful in its
proposed operations and became dormant.
On March 6, 1997, Mark A. DiSalvo, the Company's sole officer and director
acquired control of the Company from Patrick C. Brooks. Mr. Brooks had used
280,000 shares of the common stock of the Company as collateral on a loan that
Mr. DiSalvo had made from his personal funds. When the loan was not repaid, the
shares were transferred to Mr. DiSalvo. Upon receipt of the shares Mr. DiSalvo
owned 62.2% of the Company's common stock.
Mr. DiSalvo used his personal funds to revive the Company and on April 14,
1998 the Company filed a current report with the Securities and Exchange
Commission reporting the Company's change in fiscal year from December 31 to
March 31, the number of shareholders of the Company exceeding 300 and the
Company's intention to resume filing of periodic reports under Section 15(d) of
the Securities Exchange Act of 1934.
The Company's business plan is to seek, investigate, and, if warranted,
acquire one or more properties or businesses, and to pursue other related
activities intended to enhance shareholder value. The acquisition of a business
opportunity may be made by purchase, merger, exchange of stock, or otherwise,
and may encompass assets or a business entity, such as a corporation, joint
venture, or partnership. The Company has very limited capital, and it is
unlikely that the Company will be able to take advantage of more than one such
business opportunity. The Company intends to seek opportunities demonstrating
the potential of long-term growth as opposed to short-term earnings. At the
present time the Company has not identified any business opportunity that it
plans to pursue, nor has the Company reached any agreement or definitive
understanding with any person concerning an acquisition.
It is anticipated that Mr. DiSalvo will contact broker-dealers and other
persons with whom he is acquainted who are involved in corporate finance matters
to advise them of the Company's existence and to determine if any companies or
businesses they represent have an interest in considering a merger or
acquisition with the Company. No assurance can be given that the Company will be
successful in finding or acquiring a desirable business opportunity, given the
limited funds that are expected to be available for acquisitions, or that any
acquisition that occurs will be on terms that are favorable to the Company or
its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
the minimum asset requirements in order to qualify shares for trading on NASDAQ
(See "Investigation and Selection of Business Opportunities"). The Company
anticipates that the business opportunities presented to it will (i) be recently
organized with no operating history, or a history of losses attributable to
under-capitalization or other factors; (ii) be experiencing financial or
operating difficulties; (iii) be in need of funds to develop a new product or
service or to expand into a new market; (iv) be relying upon an untested product
or marketing concept; or (v) have a combination of the characteristics mentioned
in (i) through (iv). The Company intends to concentrate its acquisition efforts
on properties or businesses that it believes to be undervalued. Given the above
factors, investors should expect that any acquisition candidate might have a
history of losses or low profitability.
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The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
Any entity that has an interest in being acquired by, or merging into the
Company, is expected to be an entity that desires to become a public company and
establish a public trading market for its securities. In connection with such a
merger or acquisition, it is highly likely that an amount of stock constituting
control of the Company would be issued by the Company or purchased from the
current principal shareholders of the Company by the acquiring entity or its
affiliates. If stock is purchased from the current shareholders, the transaction
is very likely to result in substantial gains to them relative to their purchase
price for such stock. In the Company's judgment, none of its officers and
directors would thereby become an "underwriter" within the meaning of the
Section 2(11) of the Securities Act of 1933, as amended.
Depending upon the nature of the transaction, Mark DiSalvo, the current
sole officer and director of the Company may resign his management positions
with the Company in connection with the Company's acquisition of a business
opportunity. See "Form of Acquisition," below, and "Risk Factors - The Company -
Lack of Continuity in Management." In the event of such a resignation, the
Company's current management would not have any control over the conduct of the
Company's business following the Company's combination with a business
opportunity.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officer and director, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its sole officer or
director is currently affiliated. Should the Company determine in the future,
contrary to foregoing expectations, that a transaction with an affiliate would
be in the best interests of the Company and its stockholders, the Company is in
general permitted by Colorado law to enter into such a transaction if:
1. The material facts as to the relationship or interest of the affiliate
and as to the contract or transaction are disclosed or are known to the Board of
Directors, and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or
2. The material facts as to the relationship or interest of the affiliate
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
3. The contract or transaction is fair as to the Company as of the time it
is authorized, approved or ratified, by the Board of Directors or the
stockholders.
INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the other
company's management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological changes, the
perceived benefit the company will derive from becoming a publicly held entity,
and numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of the
possible need to shift marketing approaches substantially, expand significantly,
change product emphasis, change or substantially augment management, or make
other changes. The Company will be dependent upon the owners of a business
opportunity to identify any such problems that may exist and to implement, or be
primarily responsible for the implementation of, required changes. Because the
Company may participate in a business opportunity with a newly organized firm or
with a firm which is entering a new phase of growth, it should
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be emphasized that the Company will incur further risks, because management in
many instances will not have proved its abilities or effectiveness, the eventual
market for such company's products or services will likely not be established,
and such company may not be profitable when acquired.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to one such venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant to
the authority and discretion of the Company's management to complete
acquisitions without submitting any proposal to the stockholders for their
consideration. Holders of the Company's securities should not anticipate that
the Company necessarily will furnish such holders, prior to any merger or
acquisition, with financial statements, or any other documentation, concerning a
target company or its business. In some instances, however, the proposed
participation in a business opportunity may be submitted to the stockholders for
their consideration, either voluntarily by such directors to seek the
stockholders' advice and consent or because state law so requires.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's President, who is not a professional business
analyst. See "Management." Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the investigation and
selection of business opportunities, and might pay a finder's fee. Since Company
management has no current plans to use any outside consultants or advisors to
assist in the investigation and selection of business opportunities, no policies
have been adopted regarding use of such consultants or advisors, the criteria to
be used in selecting such consultants or advisors, the services to be provided,
the term of service, or regarding the total amount of fees that may be paid.
However, because of the limited resources of the Company, it is likely that any
such fee the Company agrees to pay would be paid in stock and not in cash.
Otherwise, the Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability indicated by new technology,
anticipated market expansion, or new products;
2. The Company's perception of how any particular business opportunity will
be received by the investment community and by the Company's stockholders;
3. Whether, following the business combination, the financial condition of
the business opportunity would be, or would have a significant prospect in the
foreseeable future of becoming sufficient to enable the securities of the
Company to qualify for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
securities to be exempt from the requirements of Rule 15c2-6 adopted by the
Securities and Exchange Commission. See "Risk Factors - The Company - Regulation
of Penny Stocks."
4. Capital requirements and anticipated availability of required funds, to
be provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;
7. Strength and diversity of existing management, or management prospects
that are scheduled for recruitment;
8. The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required items.
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In regard to the possibility that the shares of the Company would qualify
for listing on NASDAQ SmallCap, the current standards include the requirements
that the issuer of the securities that are sought to be listed have, among other
things, total assets of at least $4,000,000 or total market capitalization of
$50,000,000 or Net Income of $750,000 (in latest fiscal year or 2 of last 3
fiscal years). Many, and perhaps most, of the business opportunities that might
be potential candidates for a combination with the Company would not satisfy the
NASDAQ listing criteria.
No one of the factors described above will be controlling in the selection
of a business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity, the
Company will generally request that it be provided with written materials
regarding the business opportunity containing such items as a description of
products, services and company history; management resumes; financial
information; available projections, with related assumptions upon which they are
based; an explanation of proprietary products and services; evidence of existing
patents, trademarks, or services marks, or rights thereto; present and proposed
forms of compensation to management; a description of transactions between such
company and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited financial
statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.
As part of the Company's investigation, the Company's executive officers
and directors may meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission regulations regarding purchase and sale of
"penny stocks." The regulations would affect, and possibly impair, any market
that might develop in the Company's securities until such time as they qualify
for listing on NASDAQ or on another exchange which would make them exempt from
applicability of the "penny stock" regulations. See "Risk Factors - - Regulation
of Penny Stocks."
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates that have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
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FORM OF ACQUISITION
It is impossible to predict the manner in which the Company may participate
in a business opportunity. Specific business opportunities will be reviewed as
well as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of that review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986, depends upon the issuance to the stockholders of
the acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, the
Company's current stockholders would retain in the aggregate 20% or less of the
total issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current officers, directors and principal
shareholders. (See "Description of Business - General").
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, 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, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its officers
and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision were made not to
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participate in a specific business opportunity, the costs theretofore incurred
in the related investigation would not be recoverable. Moreover, because many
providers of goods and services require compensation at the time or soon after
the goods and services are provided, the inability of the Company to pay until
an indeterminate future time may make it impossible to procure goods and
services.
INVESTMENT COMPANY ACT AND OTHER REGULATION
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities. Specifically, the
Company intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore to avoid application of the costly and restrictive
registration and other provisions of the Investment Act, and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner that will
result in the availability of this exception from the definition of "investment
company." Consequently, the Company's participation in a business or opportunity
through the purchase and sale of investment securities will be limited.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment company securities.
Since the Company will not register as an investment company, stockholders will
not be afforded these protections.
Any securities that the Company might acquire in exchange for its Common
Stock will be "restricted securities" within the meaning of the Securities Act
of 1933, as amended (the "Act"). If the Company elects to resell such
securities, such sale cannot proceed unless a registration statement has been
declared effective by the Securities and Exchange Commission or an exemption
from registration is available. Section 4(1) of the Act, which exempts sales of
securities not involving a distribution, would in all likelihood be available to
permit a private sale. Although the plan of operation does not contemplate
resale of securities acquired, if such a sale were to be necessary, the Company
would be required to comply with the provisions of the Act to effect such
resale.
An acquisition made by the Company may be in an industry that is regulated
or licensed by federal, state or local authorities. Compliance with such
regulations can be expected to be a time-consuming and expensive process.
COMPETITION
The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities, primarily from business development companies,
venture capital partnerships and corporations, venture capital affiliates of
large industrial and financial companies, small investment companies, and
wealthy individuals. Many of these entities will have significantly greater
experience, resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will experience competition
from public "blind pool" companies, many of which may have more funds available
than does the Company.
EMPLOYEES
The Company is a development stage company and currently has no employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. Although there is no current plan with respect to its nature or
amount, remuneration may be paid to or accrued for the benefit of, the Company's
sole officer prior to, or in conjunction with, the completion of a business
acquisition. See "Executive Compensation" and under "Certain Relationships and
Related Transactions."
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RISK FACTORS
1. Conflicts of Interest. Certain conflicts of interest exist between
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the Company and its sole officer and director. He has other business interests
to which he devotes his attention, and he may be expected to continue to do so
although management time should be devoted to the business of the Company. As a
result, conflicts of interest may arise that can be resolved only through his
exercise of such judgment as is consistent with his fiduciary duties to the
Company. See "Management," and "Conflicts of Interest."
The Company's President may elect, in the future, to acquire or form one or
more additional companies with a business plan similar or identical to that of
the Company. Any such additional companies would be in direct competition with
the Company for available business opportunities. (See "Conflicts of Interest.")
It is anticipated that Company's President may actively negotiate or
otherwise consent to the purchase of a portion of his common stock as a
condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's President may consider his own
personal pecuniary benefit rather than the best interests of other Company
shareholders, and the other Company shareholders are not expected to be afforded
the opportunity to approve or consent to any particular stock buy-out
transaction. See "Conflicts of Interest."
2. Possible Need for Additional Financing. The Company has very
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limited funds, and such funds may not be adequate to take advantage of any
available business opportunities. Even if the Company's funds prove to be
sufficient to acquire an interest in, or complete a transaction with, a business
opportunity, the Company may not have enough capital to exploit the opportunity.
The ultimate success of the Company may depend upon its ability to raise
additional capital. The Company has not investigated the availability, source,
or terms that might govern the acquisition of additional capital and will not do
so until it determines a need for additional financing. If additional capital is
needed, there is no assurance that funds will be available from any source or,
if available, that they can be obtained on terms acceptable to the Company. If
not available, the Company's operations will be limited to those that can be
financed with its modest capital.
3. Regulation of Penny Stocks. The Company's securities are subject
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to a Securities and Exchange Commission rule that imposes special sales practice
requirements upon broker-dealers who sell such securities to persons other than
established customers or accredited investors. For purposes of the rule, the
phrase "accredited investors" means, in general terms, institutions with assets
in excess of $5,000,000, or individuals having a net worth in excess of
$1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of
broker-dealers to sell the Company's securities and also may affect the ability
of purchasers in this offering to sell their securities in any market that might
develop therefor.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, and 15g-7 under the Securities Exchange Act of 1934,
as amended. Because the securities of the Company constitute "penny stocks"
within the meaning of the rules, the rules apply to the Company and to its
securities. The rules may further affect the ability of owners of Shares to sell
the securities of the Company in any market that might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
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4. Limited Operating History. The Company was formed in April of 1989.
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The Company has limited operating history, revenues from operations, or assets
other than cash from sales of stock. The Company faces all of the same risks as
a new business and the special risks inherent in the investigation, acquisition,
or involvement in a new business opportunity. The Company must be regarded as a
new or "start-up" venture with all of the unforeseen costs, expenses, problems,
and difficulties to which such ventures are subject.
5. No Assurance of Success or Profitability. There is no assurance that
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the Company will acquire a favorable business opportunity. Even if the Company
should become involved in a business opportunity, there is no assurance that it
will generate revenues or profits, or that the market price of the Company's
Common Stock will be increased thereby.
6. Possible Business - Not Identified and Highly Risky. The Company has
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not identified and has no commitments to enter into or acquire a specific
business opportunity and therefore can disclose the risks and hazards of a
business or opportunity that it may enter into in only a general manner, and
cannot disclose the risks and hazards of any specific business or opportunity
that it may enter into. An investor can expect a potential business opportunity
to be quite risky. The Company's acquisition of or participation in a business
opportunity will likely be highly illiquid and could result in a total loss to
the Company and its stockholders if the business or opportunity proves to be
unsuccessful. See Item 1 "Description of Business."
7. Type of Business Acquired. The type of business to be acquired may be
-------------------------
one that desires to avoid effecting its own public offering and the accompanying
expense, delays, uncertainties, and federal and state requirements which purport
to protect investors. Because of the Company's limited capital, it is more
likely than not that any acquisition by the Company will involve other parties
whose primary interest is the acquisition of control of a publicly traded
company. Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.
8. Impracticability of Exhaustive Investigation. The Company's limited
----------------------------------------------
funds and the lack of full-time management will likely make it impracticable to
conduct a complete and exhaustive investigation and analysis of a business
opportunity before the Company commits its capital or other resources thereto.
Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
the Company had more funds available to it, would be desirable. The Company will
be particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking the Company's participation. A significant portion of the Company's
available funds may be expended for investigative expenses and other expenses
related to preliminary aspects of completing an acquisition transaction, whether
or not any business opportunity investigated is eventually acquired.
9. Lack of Diversification. Because of the limited financial resources
------------------------
that the Company has, it is unlikely that the Company will be able to diversify
its acquisitions or operations. The Company's probable inability to diversify
its activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
10. Possible Reliance upon Unaudited Financial Statements. The Company
--------------------------------------------------------
generally will require audited financial statements from companies that it
proposes to acquire. No assurance can be given, however, that audited financials
will be available to the Company. In cases where audited financials are
unavailable, the Company will have to rely upon unaudited information received
from target companies' management that has not been verified by outside
auditors. The lack of the type of independent verification which audited
financial statements would provide, increases the risk that the Company, in
evaluating an acquisition with such a target company, will not have the benefit
of full and accurate information about the financial condition and operating
history of the target company. This risk increases the prospect that the
acquisition of such a company might prove to be an unfavorable one for the
Company or the holders of the Company's securities.
Moreover, the Company will be subject to the reporting provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus will
be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
statements would not be considered by the Company to be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject
9
<PAGE>
to the reporting provisions of the Exchange Act, complete an acquisition of an
entity for which audited financial statements prove to be unobtainable, the
Company would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action are likely to
have material, adverse consequences for the Company and its business. The
imposition of administrative sanctions would subject the Company to further
adverse consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, the
automated quotation system sponsored by the National Association of Securities
Dealers, Inc., or on any existing stock exchange. Moreover, the lack of such
financial statements is likely to discourage broker-dealers from becoming or
continuing to serve as market makers in the securities of the Company. Without
audited financial statements, the Company would almost certainly be unable to
offer securities under a registration statement pursuant to the Securities Act
of 1933, and the ability of the Company to raise capital would be significantly
limited until such financial statements were to become available.
11. Investment Company Regulation. The Company does not intend to become
------------------------------
classified as an "investment company" under the Investment Company Act of 1940
(the "Investment Act"). The Company believes that it will not become subject to
regulation under the Investment Act because (i) the acquisition under taken by
the Company will result in the Company's obtaining a majority interest in any
such merger or acquisition candidate, and (ii) the Company intends to
discontinue any investment in a prospective merger or acquisition candidate in
which a majority interest cannot be obtained. Should the Company be required to
register as an investment company, it shall incur significant registration and
compliance costs. The Company has obtained no formal determination from the
Securities and Exchange Commission (the "Commission") as to the status of the
Company under the Investment Act. Any violation of the Investment Act will
subject the Company to materially adverse consequences. Should the Commission
find that the Company is subject to the Investment Act, and order the Company to
register under such Act, the Company would vigorously resist such finding and
order. Irrespective of whether the Commission or the Company were to prevail in
such a dispute, however, the Company would be damaged by the costs and delays
involved. Because the Company will not register under the Investment Act,
investors in the Company will not have the benefit of the various protective
provisions imposed on investment companies by such Act, including requirements
for independent directors.
12. Other Regulation. An acquisition made by the Company may be of a
-----------------
business that is subject to regulation or licensing by federal, state, or local
authorities. Compliance with such regulations and licensing can be expected to
be a time-consuming, expensive process and may limit other investment
opportunities of the Company.
13. Dependence upon Management; Limited Participation of Management. The
----------------------------------------------------------------
Company currently has a single individual who is serving as its sole officer and
director. The Company will be heavily dependent upon his skills, talents, and
abilities to implement its business plan, and may, from time to time, find that
the inability of the sole officer and director to devote his full time attention
to the business of the Company results in a delay in progress toward
implementing its business plan. Furthermore, since one individual is serving as
the sole officer and director of the Company, it will be entirely dependent upon
his experience in seeking, investigating, and acquiring a business and in making
decisions regarding the Company's operations. See "Management." Because
investors will not be able to evaluate the merits of possible business
acquisitions by the Company, they should critically assess the information
concerning the Company's sole officer and director.
14. Lack of Continuity in Management. The Company does not have an
-----------------------------------
employment agreement with its sole officer and director, and as a result, there
is no assurance that he will continue to manage the Company in the future. In
connection with acquisition of a business opportunity, it is likely the current
officer and director of the Company may resign. A decision to resign will be
based upon the identity of the business opportunity and the nature of the
transaction, and is likely to occur without the vote or consent of the
stockholders of the Company.
15. Indemnification of Officers and Directors. The Company's Articles of
------------------------------------------
Incorporation are being amended to provide for the indemnification of its
directors, officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to which
they become a party arising from their association with or activities on behalf
of the Company. See Item 4 - "Submission of Matters to a Vote of Security
Holders." The Company will also bear the expenses of such litigation for any of
its
10
<PAGE>
directors, officers, employees, or agents, upon such person's promise to repay
the Company therefor if it is ultimately determined that any such person shall
not have been entitled to indemnification. This indemnification policy could
result in substantial expenditures by the Company that it will be unable to
recoup.
16. Director's Liability Limited. The Company's Articles of Incorporation
-----------------------------
are being amended to exclude personal liability of its directors to the Company
and its stockholders for monetary damages for breach of fiduciary duty except in
certain specified circumstances. Accordingly, the Company will have a much more
limited right of action against its directors than otherwise would be the case.
This provision does not affect the liability of any director under federal or
applicable state securities laws. See Item 4 - "Submission of Matters to a Vote
of Security Holders."
17. Dependence upon Outside Advisors. To supplement the business
-------------------------------------
experience of its sole officer and director, the Company may be required to
employ accountants, technical experts, appraisers, attorneys, or other
consultants or advisors. The selection of any such advisors will be made by the
Company's President without any input from stockholders. Furthermore, it is
anticipated that such persons may be engaged on an "as needed" basis without a
continuing fiduciary or other obligation to the Company. In the event the
President of the Company considers it necessary to hire outside advisors, he may
elect to hire persons who are affiliates, if they are able to provide the
required services.
18. Leveraged Transactions. There is a possibility that any acquisition of
----------------------
a business opportunity by the Company may be leveraged, i.e., the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
19. Competition. The search for potentially profitable business
-----------
opportunities is intensely competitive. The Company expects to be at a
disadvantage when competing with many firms that have substantially greater
financial and management resources and capabilities than the Company. These
competitive conditions will exist in any industry in which the Company may
become interested.
20. No Foreseeable Dividends. The Company has not paid dividends on its
--------------------------
Common Stock and does not anticipate paying such dividends in the foreseeable
future.
21. Loss of Control by Present Management and Stockholders. The Company
--------------------------------------------------------
may consider an acquisition in which the Company would issue as consideration
for the business opportunity to be acquired an amount of the Company's
authorized but unissued Common Stock that would, upon issuance, represent the
great majority of the voting power and equity of the Company. The result of such
an acquisition would be that the acquired company's stockholders and management
would control the Company, and the Company's management could be replaced by
persons unknown at this time. Such a merger would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. In addition,
the Company's President could sell his control block of stock at a premium price
to the acquired company's stockholders.
22. Dilutive Effects of Authorizing and Issuing Additional Common Stock.
---------------------------------------------------------------------
The shareholders of the Company have the authority to increase the number of
authorized shares of the Company. The Company's Articles of Incorporation are
being amended to increase the number of authorized shares of common stock of the
Company to 50,000,000. The president of the Company, Mark DiSalvo, owns enough
shares of the stock of the Company to approve of such an increase without any
additional shareholder support. In the event that the number of authorized
shares of common stock of the Company is increased, a vast majority of the
Company's authorized but unissued Common Stock could be unissued. The board of
directors of the Company would have the authority to issue such unissued shares
without the consent or vote of the stockholders of the Company. The issuance of
these shares may further dilute the interests of shareholders and will reduce
their proportionate ownership and voting power in the Company.
23. Limited Public Market. There is a limited public market for the
-----------------------
Company's common stock, and no assurance can be given that a market will develop
or that a shareholder ever will be able to liquidate his
11
<PAGE>
investment without considerable delay, if at all. If a market should develop,
the price may be highly volatile. Factors such as those discussed in this "Risk
Factors" section may have a significant impact upon the market price of the
securities offered hereby. Owing to the low price of the securities, many
brokerage firms may not be willing to effect transactions in the securities.
Even if a purchaser finds a broker willing to effect a transaction in these
securities, the combination of brokerage commissions, state transfer taxes, if
any, and any other selling costs may exceed the selling price. Further, many
lending institutions will not permit the use of such securities as collateral
for any loans.
24. Rule 144 Sales. The vast majority of the outstanding shares of Common
--------------
Stock held by present stockholders are "restricted securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted
shares, these shares may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable exemptions
from registration under the Act and as required under applicable state
securities laws. Rule 144 provides in essence that a person who has held
restricted securities for a prescribed period may, under certain conditions,
sell every three months, in brokerage transactions, a number of shares that does
not exceed the greater of 1.0% of a company's outstanding common stock or the
average weekly trading volume during the four calendar weeks prior to the sale.
There is no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the restricted securities have been held by the owner for a
period of two years. A sale under Rule 144 or under any other exemption from the
Act, if available, or pursuant to subsequent registrations of shares of Common
Stock of present stockholders, may have a depressive effect upon the price of
the Common Stock in any market that may develop. All of the total 4,999,983
shares of common stock held by present stockholders of the Company are either
freely tradable or available for resale under Rule 144. The 4,339,306 shares
held by the Company's president are subject to applicable volume restrictions
under the Rule.
25. Blue Sky Considerations. Because the securities registered hereunder
-----------------------
have not been registered for resale under the blue sky laws of any state, the
holders of such shares and persons who desire to purchase them in any trading
market that might develop in the future, should be aware that there may be
significant state blue-sky law restrictions upon the ability of investors to
sell the securities and of purchasers to purchase the securities. Some
jurisdictions may not under any circumstances allow the trading or resale of the
Company's securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.
ITEM 2. PROPERTIES.
- ------- ----------
The Company currently maintains a mailing address at 192 Searidge Court,
Shell Beach, California 93449, which is the address of its president. The
Company's telephone number is (805) 773-5350. Other than this mailing address,
the Company does not currently maintain any other office facilities, and does
not anticipate the need for maintaining office facilities at any time in the
foreseeable future. The Company pays no rent or other fees for the use of this
mailing address. See "Item 13 - Certain Relationships and Related Transactions."
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
Management is not aware of any material litigation pending against the
Company or its properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- -----------------------------------------------------------
The annual meeting of shareholders of record on March 23, 1998, of the
Company will be held on April 23, 1998, in Shell Beach, California to elect the
directors of the Company and to amend the Articles of Incorporation of the
Company. Mark DiSalvo is the sole person nominated as a director. The amendment
of the Articles of Incorporation will provide, for indemnification of the
Company's officers, directors, employees, and agents, limited liability for
directors and an increase in the number of authorized shares of common stock to
50,000,000. All items should be approved since the Company's president owns
enough shares of the common stock of the Company to approve all items.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- --------------------------------------------------------------
MATTERS.
- -------
The Company's Common Stock resumed public trading on January 15, 1998.
There has been no other trading during the two most recent fiscal years nor any
subsequent interim period for which financial statements are, or should be,
included. On April 13, 1998, the average closing bid price for the common stock
of the Company was $.1125. The high and low closing bid prices since trading
resumed were as follows:
Quarter Ended Low Bid High Bid
-------------- ------- --------
March 31, 1998 $.10 $.125
Some of the above prices reflect inter-dealer prices without retail
mark-up, markdown or commission and may not represent actual transactions. As of
April 13, 1998, there were approximately 473 shareholders of record of the
Company's Common Stock.
The Company has not paid any dividends to its shareholders and has no
present intention of changing this policy.
ITEM 6. SELECTED FINANCIAL DATA.
- ------- -------------------------
The following selected financial data, insofar as it relates to each of the
fiscal years ended March, 31, 1996 through 1998, has been derived from annual
financial statements including the Statements of Financial Condition at March
31, 1998 and 1997 and the related statements of operations and shareholder's
equity and cash flows for the three fiscal years ended March 31, 1998 and notes
thereto appearing elsewhere herein. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Twelve Month Twelve Month Twelve Month
Period ended Period ended Period ended
Mar. 31, 1998 Mar. 31, 1997 Mar. 31, 1996
<S> <C> <C> <C>
Results of Operations:
Operating Revenues $ 0 $ 0 $ 0
Income (loss) $ 0 $ 0 $ 0
Income (loss) per share $ 0 $ 0 $ 0
Balance Sheet Data: Mar. 31, 1998 Mar. 31, 1997
Total Assets $ 0 $ 0
Total Liabilities $ 0 $ 0
Total SH's Equity (Deficit) ($30,000) ($30,000)
</TABLE>
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS.
- -----------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
stockholder's equity other than the receipt of subscriptions for its common
stock in the net amount of $30,000. Consequently, the Company's Statement of
Financial Position for the fiscal years ended March 31, 1998, 1997 and 1996
reflects a total asset value of $0.
The Company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its liquidity and capital resources will
be diminished prior to the consummation of a business combination or whether its
capital will be further depleted by the operating losses (if any) of the
business entity which the Company may eventually acquire.
RESULTS OF OPERATIONS
During the period from April 5, 1989 (inception) through March 31, 1998,
the Company has engaged in no significant operations other than organizational
activities, acquisition of capital and preparation for registration of its
securities under the Securities Exchange Act of 1934, as amended. The Company
received no revenues during this period.
For the current fiscal year, the Company anticipates incurring a loss as a
result of expenses associated with resumption of reporting under the Securities
Exchange Act of 1934 and expenses associated with locating and evaluating
acquisition candidates. The Company anticipates that until a business
combination is completed with an acquisition candidate, it will not generate
revenues other than interest income, if any, and may continue to operate at a
loss after completing a business combination, depending upon the performance of
the acquired business.
NEED FOR ADDITIONAL FINANCING
The Company believes that some additional capital will be required to meet
the Company's cash needs, including the costs of compliance with the continuing
reporting requirements of the Securities Exchange Act of 1934, as amended. There
is no assurance the Company will be able to acquire the additional capital or
that the funds, if acquired, will ultimately prove to be adequate to allow it to
complete a business combination, and once a business combination is completed,
the Company's needs for additional financing are likely to increase
substantially.
No commitments to provide additional funds have been made by management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to the Company to allow it to cover its expenses.
Irrespective of whether the Company's cash assets prove to be inadequate to
meet the Company's operational needs, the Company might seek to compensate
providers of services by issuances of stock in lieu of cash. For information as
to the Company's policy in regard to payment for consulting services, see
"Certain Relationships and Transactions."
INFLATION
- ---------
The Company has limited experience with respect to the effect of inflation
on its business. However, based on management's understanding of industry
experience, it believes that inflation will not have a significant impact on the
results of the Company's operations in the future.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- -----------------------------------------------
The financial statements required by this item are set forth as indicated
in Item 14(a)(1).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------- ------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE.
- --------------------------------------
NONE.
PART III
MANAGEMENT
- ----------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- --------------------------------------------------------
The present directors and executive officers of the Company are listed
below, together with brief accounts of their experience and certain other
information.
<TABLE>
<CAPTION>
Year First
Name Age Office Elected
- --------------- --- ----------------------- ----------
<S> <C> <C> <C>
Mark A. DiSalvo 47 Chairman of the Board 1997
Chief Executive Officer 1997
Treasurer 1997
Secretary 1997
</TABLE>
All officers serve at the pleasure of the Board. Directors serve until the
next annual meeting of shareholders and until their respective successors are
elected and qualified.
The sole director and officer of the Company will devote his time to
the Company's affairs on an "as needed" basis. As a result, the actual amount of
time which he will devote to the Company's affairs is unknown and is likely to
vary substantially from month to month.
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
- -------------------------------------------------------------
Mark A. DiSalvo has been President, Chairman of the Board of Directors,
-----------------
Chief Executive Officer, Treasurer and Secretary of the Company since March,
1997. Mr. DiSalvo, who is the Company's President, has served as the sole
officer and director of the Company since then. Mr. DiSalvo is currently
self-employed as a business consultant, providing consulting services relating
to mergers and acquisitions. Mr. DiSalvo has also been engaged in the securities
business in various capacities from 1984 to the present.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Colorado law, the Company's Articles of Incorporation will
be amended to provide that the Company will indemnify its directors and officers
against expenses and liabilities they incur to defend, settle, or satisfy any
civil or criminal action brought against them on account of their being or
having been Company directors or officers unless, in any such action, they are
adjudged to have acted with gross negligence or willful misconduct. See Item 4 -
"Submission of Matters to a Vote of Security Holders." Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in that Act and is, therefore, unenforceable.
15
<PAGE>
EXCLUSION OF LIABILITY
Pursuant to the Colorado Business Corporation Act, the Company's Articles
of Incorporation will be amended to exclude personal liability for its directors
for monetary damages based upon any violation of their fiduciary duties as
directors, except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, acts in violation of Section 7-106-401 of the Colorado
Business Corporation Act, or any transaction from which a director receives an
improper personal benefit. See Item 4 - "Submission of Matters to a Vote of
Security Holders." This exclusion of liability does not limit any right which a
director may have to be indemnified and does not affect any director's liability
under federal or applicable state securities laws.
CONFLICTS OF INTEREST
The sole officer and director of the Company will not devote more than a
portion of his time to the affairs of the Company. There will be occasions when
the time requirements of the Company's business conflict with the demands of his
other business and investment activities. Such conflicts may require that the
Company attempt to employ additional personnel. There is no assurance that the
services of such persons will be available or that they can be obtained upon
terms favorable to the Company.
The Company's President may elect, in the future, to acquire or form one or
more additional companies with a business plan similar or identical to that of
the Company. Any such additional companies would also be in direct competition
with the Company for available business opportunities.
There is no procedure in place that would allow Mr. DiSalvo to resolve
potential conflicts in an arms-length fashion. Accordingly, he will be required
to use his discretion to resolve them in a manner which he considers
appropriate.
The Company's sole officer and director may actively negotiate or otherwise
consent to the purchase of a portion of his common stock as a condition to, or
in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium over the initial cost of such shares may
be paid by the purchaser in conjunction with any sale of shares by the Company's
officer and director which is made as a condition to, or in connection with, a
proposed merger or acquisition transaction. The fact that a substantial premium
may be paid to the Company's sole officer and director to acquire his shares
creates a potential conflict of interest for him in satisfying his fiduciary
duties to the Company and its other shareholders. Even though such a sale could
result in a substantial profit to him, he would be legally required to make the
decision based upon the best interests of the Company and the Company's other
shareholders, rather than his own personal pecuniary benefit.
ITEM 11. EXECUTIVE COMPENSATION.
- -------- -----------------------
For the fiscal year ended March 31, 1998, all executive officers of the
Company as a group (1 person), had aggregate cash compensation of approximately
$0.
EMPLOYMENT AGREEMENTS
- ----------------------
The Company does not have employment agreements with any of its officers or
directors. Competitive compensation and incentive programs will be instituted
when operations achieve a profitable performance acceptable to the Company's
Board of Directors. Directors who are not employees of the Company are
compensated at the rate of $250 for each Board meeting attended.
16
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- --------------------------------------------------------------
The following table sets forth, as of April 13, 1998, certain information
concerning the ownership of shares of the Company's Common Stock by persons
owning more than 5% of the outstanding shares of the Common Stock and the
Directors of the Company and by Directors and Officers as a group.
<TABLE>
<CAPTION>
Name and Address Percentage of
of Beneficial Owner Shares Owned Outstanding Shares
- ------------------------------ ------------- -------------------
<S> <C> <C>
Mark A. DiSalvo 4,439,306 (1) 88.8%
192 Searidge Court
Shell Beach, California 93449
All directors and
officers as a group (1 person) 4,439,306 (1) 88.8%
<FN>
(1) Does not include 360 shares owned by Leah R. DiSalvo, Mr. DiSalvo's
wife, as to which shares Mark A. DiSalvo disclaims any beneficial interest.
(2) Does not include 227,877 shares owned by David DiSalvo, Mr. DiSalvo's
brother, as to which shares Mark A. DiSalvo disclaims any beneficial interest.
Mark A. DiSalvo may be deemed a "parent" or "promoter" of the Company under
the Securities Act of 1933. See Item 1 "Description of Business - General," Item
10 "Directors and Executive Officers of the Registrant" and "Item 13 - Certain
Relationships and Related Transactions."
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- --------------------------------------------------
On March 6, 1997, Mark A. DiSalvo, the Company's sole officer and director
acquired control of the Company from Patrick C. Brooks. Mr. Brooks had used
280,000 shares of the common stock of the Company as collateral on a loan that
Mr. DiSalvo had made from his personal funds. When the loan was not repaid, the
shares were transferred to Mr. DiSalvo.
On November 19, 1997, Mr. DiSalvo returned 315,483 shares of the common
stock of the Company to the Company in order to facilitate a forward split of 19
for 1 which was effected on November 26, 1998. Although there is no current plan
in existence, it is possible that the Company will adopt a plan to compensate
Mr. DiSalvo with additional shares of common stock of the Company after the
Articles of Incorporation have been amended to increase the number of authorized
shares of common stock to 50,000,000.
No officer, director, promoter, or affiliate of the Company has or proposes
to have any direct or indirect material interest in any asset proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
The Company has adopted a policy under which any consulting or finder's fee
that may be paid to a third party for consulting services to assist management
in evaluating a prospective business opportunity would be paid in stock or in
cash. Any such issuance of stock would be made on an ad hoc basis. Accordingly,
the Company is unable to predict whether or in what amount such a stock issuance
might be made.
Although there is no current plan in existence, it is possible that the
Company will adopt a plan to pay or accrue compensation to its sole officer and
director for services related to seeking business opportunities and completing a
merger or acquisition transaction.
17
<PAGE>
The Company maintains a mailing address at the home of its president, but
otherwise does not maintain an office. As a result, it pays no rent and incurs
no expenses for maintenance of an office and does not anticipate paying rent or
incurring office expenses in the future. It is likely that the Company will
establish and maintain an office after completion of a business combination.
Although management has no current plans to cause the Company to do so, it
is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's president to the acquisition candidate or principals thereof, or to
other individuals or business entities, or requiring some other form of payment
to the Company's president, or requiring the future employment of specified
officers and payment of salaries to them. It is more likely than not that any
sale of securities by the Company's president to an acquisition candidate would
be at a price substantially higher than that originally paid by him. Any payment
to the Company's president in the context of an acquisition involving the
Company would be determined entirely by the largely unforeseeable terms of a
future agreement with an unidentified business entity.
18
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- -------- ----------------------------------------------------------------
(A) DOCUMENTS FILED WITH REPORT:
---------------------------
1. Financial Statements and Financial Statement Schedules.
The Financial Statements and Financial Statement Schedules listed in
the accompanying Index to Financial Statements are filed as part of this report.
2. Exhibits.
The Exhibits listed on the accompanying Index to Exhibits are
filed as part of this report.
(B) REPORTS ON FORM 8-K:
--------------------
On April 14, 1998, the Company filed a report on Form 8-K dated
February 8, 1991 wherein the Company reported that on March 31, 1998, the number
of shareholders of the Company increased above 300 and the Company had
determined to resume filing reports pursuant to Section 15(d) of the Securities
Exchange Act of 1934. The Company also reported that on February 8, 1991, the
Company amended its charter to change its name to DentMart Group, Inc. On
February 15, 1991, to effectuate a change of domicile to Colorado, the company
merged with DentMart Group, Inc., a Colorado corporation. Finally, the Company
reported that on March 31, 1998, the Company changed its fiscal year to March 31
and the Company would file Form 10-K for the fiscal year ended March 31, 1998.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DEMTMART GROUP, INC.
Date: April 15, 1998 By: /S/ Mark A. DiSalvo
---------------------------------
Mark A. DiSalvo, President, Principal Executive
Officer and Chairman of the Board
Date: April 15, 1998 By: /S/ Mark A. DiSalvo
---------------------------------
Mark A. DiSalvo, Principal Financial
and Accounting Officer and Director
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.
Date: April 15, 1998 By: /S/ Mark A. DiSalvo
---------------------------------
Mark A. DiSalvo, President, Principal Executive
Officer and Chairman of the Board
Date: April 15, 1998 By: /S/ Mark A. DiSalvo
---------------------------------
Mark A. DiSalvo, Principal Financial
and Accounting Officer and Director
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
No annual report or proxy material has been sent to security holders.
20
<PAGE>
DENTMART GROUP, INC.
--------------------
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
__ AND FINANCIAL STATEMENT SCHEDULES_____
-------------------------------------------
Financial Statements Page
- ----------------------------------------------------------------------- ----
<S> <C>
Independent Auditors' Report F-1
Statements of Financial Condition - as of March 31, 1998, 1997 and 1996 F-2
Statements of Operations for the Years
Ended March 31, 1998, 1997 and 1996 F-3
Statements of Shareholders' Equity from
Inception (April 5, 1989) to March 31, 1998 F-4
Statements of Cash Flows for the Years Ended
March 31, 1998, 1997 and 1996 F-5
Notes to Financial Statements F-6
</TABLE>
21
<PAGE>
DENTMART GROUP, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED
MARCH 31, 1998
INDEX TO EXHIBITS
- -------------------
(3) Article of Incorporation and Bylaws
3.1 Articles of Merger of DentMart Group, Inc.
3.2 Plan and Agreement of Merger
3.3 Articles of Incorporation of DentMart Group, Inc.
3.4 Amendment of Articles of Incorporation filed May 21, 1991
3.5 Amendment of Articles of Incorporation filed May 23, 1991
3.6 Bylaws of DentMart Group, Inc.
3.7 Specimen Stock Certificate
27.1 Financial Data Schedule
See response to Item 14(a)(i), Financial Statements
22
<PAGE>
GERALD R. PERLSTEIN
CERTIFIED PUBLIC ACCOUNTANT
1260 S. BEVERLY GLEN BLVD., SUITE 106
LOS ANGELES, CA 90024
_____
TELEPHONE (310) 275-4650
FAX (310) 275-4611
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
DENTMART GROUP, INC.
Pismo Beach, California
I have audited the accompanying statements of financial position of DENTMART
GROUP, INC. (a development stage company) as of March 31, 1996, 1997 and 1998
and the related statements of operations, shareholders' equity, and cash flows
for the years then ended. 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.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial positions of DENTMART GROUP, INC. (a
development stage company) as of March 31, 1996, 1997 and 1998 and the results
of its operations, shareholders' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.
/S/ Gerald R. Perlstein
Gerald R. Perlstein
Los Angeles, California
April 8, 1998
F-1
<PAGE>
DENTMART GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
ASSETS
------
YEARS ENDED MARCH 31
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS
- ------------------------------------
None 0 0 0
-------- -------- --------
TOTAL ASSETS 0 0 0
-------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
- -------------------
None
SHAREHOLDERS' EQUITY
- --------------------
Common Stock: Par value $.01;
5,000,000 shares authorized;
4,999,983 shares in 1998,
578,640 shares in 1997 and
600,000 shares in 1996,
were issued and outstanding 30,000 30,000 30,000
Accumulated deficit during
development stage (30,000) (30,000) (30,000)
-------- -------- --------
Total Shareholders' Equity 0 0 0
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 0 0 0
-------- -------- --------
<FN>
The Accompanying Notes are an integral part of these Financial Statements.
</TABLE>
F-2
<PAGE>
DENTMART GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
--------------------
PERIOD FROM APRIL
5, 1989 (INCEPTION)
THROUGH MARCH 31,
1998 1997 1996 1998
---- ---- ---- --------------------
<S> <C> <C> <C> <C>
Revenues None None None None
Cost and expenses None None None $30,000
---- ---- ---- --------------------
NET INCOME (LOSS) NONE NONE NONE $30,000
---- ---- ---- --------------------
<FN>
The Accompanying Notes are an integral part of these Financial Statements.
</TABLE>
F-3
<PAGE>
DENTMART GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM INCEPTION (APRIL 5, 1989) TO MARCH 31, 1998
<TABLE>
<CAPTION>
RET. DEFICIT
CAPITAL CONTR. ACCUM.
COMMON STOCK IN EXCESS OF PAR DURING
NUMBER AMOUNT VALUE OF STOCK DEVELOP. STAGE TOTAL
------------ --------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of Common Stock $ 5,000,000 $ 5,000 -- -- $ 5,000
Net (Loss) for the year 1989 (6,791) (6,791)
------------ --------- ----------------- --------------- -----------
Balance at December 31, 1989 5,000,000 5,000 -- (6,791) (1,791)
Issuance of Common Stock 250,000 250 24,750 -- 25,000
Net (Loss) for the year 1990 (7,771) ( 7,771)
------------ --------- ----------------- --------------- -----------
Balance at December 31, 1990 5,250,000 5,250 24,750 (14,562) 15,438
Net (Loss) for the year 1991 (10,438) (10,438)
Stock split: 5 for 1 21,000,000
------------
Subtotal 26,250,000
Shares issues per merger with
Home Indemnity, Inc. 20,000,000 39,750 339,250 -- 379,000
(1,250,000) -- -- -- --
------------ --------- ----------------- --------------- -----------
Shares surr. 45,000,000 45,000 364,000 (25,000) 384,000
------------
Reverse split: 1 for 10 4,500,000
------------
Reverse split: 1 for 5 900,000
Cancellation of shares (300,000) (15,000) (364,000) (379,000)
------------ --------- ----------------- --------------- -----------
Balance at December 31, 1991 600,000 30,000 0 (25,000) 5,000
Net Income for year 1992 0 0
------------ --------- ----------------- --------------- -----------
Balance at December 31, 1992 600,000 30,000 0 (25,000) 5,000
Net (loss) for year 1993 (5,000) (5,000)
------------ --------- ----------------- --------------- -----------
Balance December 31, 1993 600,000 30,000 0 (30,000) 0
No activity for years ended
December 31, 1994, and 1995 and for
the period ending March 31, 1996
------------ --------- ----------------- --------------- -----------
Balance March 31, 1996 600,000 30,000 0 (30,000) 0
Cancellation of shares (21,360) -- --
------------ --------- ----------------- --------------- -----------
Balance March 31, 1997 578,640 30,000 0 (30,000) 0
Surrender of shares (315,483) --
Stock split: 19 for 1 4,736,826 -- --
------------ --------- ----------------- --------------- -----------
Balance March 31, 1998 4,999,983 30,000 0 (30,000) 0
------------ --------- ----------------- --------------- -----------
<FN>
The Accompanying Notes are an integral part of these Financial Statements.
</TABLE>
F-4
<PAGE>
DENTMART GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
--------------------------------------
PERIOD FROM APRIL
5, 1989 (INCEPTION)
THROUGH MARCH
1998 1997 1996 31, 1998
---- ---- ---- --------------------
<S> <C> <C> <C> <C>
Cash Flows from Operations:
Net loss None None None $ 30,000
---- ---- ---- --------------------
Net cash uses by operations None None None (30,000)
Cash Flows from Investment
Activities None None None None
Cash Flows from Financing
Activities None None None 30,000
---- ---- ---- --------------------
Net Increase (Decrease) in Cash None None None 0
Cash Balance, Ending NONE NONE NONE 0
---- ---- ---- --------------------
<FN>
The Accompanying Notes are an integral part of these Financial Statements.
</TABLE>
F-5
<PAGE>
DENTMART GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998, 1997 AND 1996
1. ORGANIZATION AND BUSINESS:
---------------------------
Dentmart Group, Inc. (the "Company") is the successor to Elgin Corporation.
Elgin Corporation was incorporated under the laws of the State of Delaware
on April 5, 1989. On February 6, 1991, Elgin Corporation merged with Home
Indemnity, Incorporated, a Nevada corporation, the assets of which
consisted of a portfolio of securities and a wholly-owned subsidiary,
Dentmart Incorporated. On February 8, 1991, Elgin Corporation amended its
Articles of Incorporation to change its name to Dentmart Group, Inc.
On February 15, 1991, Dentmart Group, Inc. (the successor Delaware
corporation to Elgin Corporation) merged with Dentmart Group, Inc. (a
Colorado corporation). The Colorado corporation is the successor entity.
Presently, the Company is not engaged in any business activity, and has
been dormant since 1992.
Effective March 31, 1998, the Company changed its year end for both
accounting and tax purposes from a calendar year ending December 31st to a
fiscal year ending March 31st.
The statements herein are presented to retroactively reflect the change in
year end.
2. COMMITMENTS AND CONTINGENCIES:
-------------------------------
The Company has no outstanding commitments or obligations, nor is it a
party to any litigation. The Company presently shares office space with a
shareholder for which it pays no rent.
3. INCOME TAXES:
-------------
The Company owes no federal income taxes. Operating loss carry-forwards
have been disallowed due to the change in majority ownership of the Company
during 1994 and 1995.
4. SHAREHOLDERS' EQUITY:
---------------------
On April 7, 1989, Elgin Corporation issued 3,500,000 shares of common stock
to its officers and directors for a consideration of $3,500. On June 21,
1989, 1,500,000 shares of common stock were issued for a consideration of
$1,500.
F-6
<PAGE>
DENTMART GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998, 1997 AND 1996
On December 8, 1990, 250,000 shares were issued pursuant to a Public Offering at
a purchase price of $.10 per share for a total amount of $25,000.
On February 6, 1991, Elgin corporation amended its Articles of Incorporation to
authorize a stock split of five shares for one of Common Stock. This increased
the number of issued and outstanding shares of common stock in Elgin Corporation
to 26,250,000.
On February 6, 1991, Elgin Corporation entered into a merger agreement with
Home Indemnity, Incorporated (a Nevada corporation). The agreement provided for
the conversion of one share of Home Indemnity, Incorporated stock into four
shares of Elgin Corporation. A total of 20,000,000 shares were issued due to
the merger.
On February 7, 1991, the then two majority shareholders each surrendered
625,000 shares of common stock.
On February 8, 1991, Elgin Corporation changed its name to Dentmart Group,
Inc. On February 15, 1991 a merger took place between Dentmart Group, Inc.
(Delaware) and Dentmart Group, Inc. (Colorado). The shareholders were given one
share of Dentmart Group, Inc. (Colorado) for every ten shares of Dentmart Group,
Inc. (Delaware), resulting in the net issued and outstanding shares of Dentmart
Group, Inc. (Colorado) amounting to 4,500,000.
On April 2, 1991, the Company issued new common stock to reflect a reverse
stock split of 1 for 5 shares resulting in a total of 900,000 issued and
outstanding shares.
In September 1991, the Company traded its marketable securities obtained in
the Home Indemnity, Incorporated merger in exchange for the purchase of 300,000
shares of the Company's own common stock which were subsequently cancelled by
the Company. To complete this transaction an additional 21,360 shares were
cancelled during March 1997.
During the period February 14, 1994 to February 25, 1995, the shares previously
owed by the majority shareholders, and therefore, control of the Company, were
acquired by a new group of investors.
Effective November 19, 1997, the current majority shareholder reduced his
holdings in the company by surrendering 315,483 shares of the Company's common
stock.
Effective November 26, 1997, there was a forward stock split of 19 for 1
common shares, resulting in a total of 4,999,983 shares being issued and
outstanding.
F-7
<PAGE>
ARTICLES OF MERGER
OF
DENTMART GROUP, INC.
A Colorado Corporation
Pursuant to Colorado Corporation Code Section 7-7-107(3), the undersigned,
Patrick C. Brooks and Stephanie A. Brooks, being the President and Secretary,
respectively, of DENTMART GROUP, INC., a Colorado corporation (the " Subsidiary
Corporation") , which is the surviving corporation of a merger between the
subsidiary corporation and DENTMART GROUP, INC., a Delaware corporation (the
11Parent Corporation") , do hereby 5tate as follows:
(a) The plan of merger of the Parent Corporation into the Subsidiary
Corporation is as set forth in the Plan and Agreement of Merger, a true and
complete copy of which is attached hereto and by this reference incorporated
herein.
(b) Immediately prior to the merger, the Parent Corporation owned at least
ninety percent (90%) of the outstanding shares of each class of the Subsidiary
Corporation.
(c) The mailing to shareholders of the Subsidiary Corporation of a copy of
the Plan and Agreement of Merger was duly waived. The merger of the Parent
Corporation into the Subsidiary Corporation was submitted to the shareholders of
the Parent Corporation for the approval of such shareholders, and the number of
shares of the Parent Corporation that voted for the Plan and Agreement of Merger
was sufficient for approval.
WHEREFORE, the undersigned have July executed these Articles of Merger
this 15th day of February, 1991.
/S/ Patrick C. Brooks /S/ Stephanie A. Brooks
- -------------------------------- --------------------------------
Patrick C. Brooks Stephanie A. Brooks
<PAGE>
PLAN AND AGREEMENT OF MERGER
This PLAN AND AGREEMENT OF MERGER (this "Plan and Agreement of Merger") is
made as of the 15th day of February, 1991, by and between DENTMART GROUP, INC.,
a Colorado corporation (the "Subsidiary Corporation"), and DENTMART GROUP, INC.,
a Delaware corporation (the "Parent Corporation").
WHEREAS, it is in the best interests of the Parent Corporation to effect a
change of domicile from Delaware to Colorado, for the reason that a Colorado
corporation is loss costly to maintain than a Delaware corporation due to the
more favorable tax treatment afforded to corporations under Colorado law; and
WHEREAS, the Subsidiary Corporation was formed for the express purpose of
effecting said change of domicile from Delaware to Colorado; and
WHEREAS, the Parent Corporation is authorized to issue 50,000,000 (fifty
million) shares of Common Stock, par value $.001 per share, of which 45 million
shares are issued and outstanding as of the date hereof; and
WREREAS, the Subsidiary Corporation is authorized to issue 25,000,000
(twenty-five million) shares of Common Stock, par value $.0l per share, of which
100 (one hundred) shares are issued and outstanding as of the date hereof; and
WHEREAS, the Parent Corporation owns all 100 (one hundred) shares of the
issued and outstanding stock of the Subsidiary Corporation.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, it is agreed as follows:
1. MERGER. Upon the terms set forth herein, the Parent Corporation shall be
------
merged with and into the Subsidiary Corporation, and the subsidiary Corporation
shall be the surviving corporation pursuant to the terms and provisions of this
Plan and Agreement of Merger in accordance with the laws of the State of
Delaware and the State of Colorado, The Certificate of Incorporation of the
Subsidiary Corporation shall continue in effect and shall be its Certificate of
Incorporation.
<PAGE>
2. SURVIVING CORPORATION TO SUCCEED TO PROPERTIES AND OBLIGATIONS OF
-----------------------------------------------------------------------
CONSTITUENT CORPORATIONS. Upon the effective date of the merger as set forth in
- ------------------------
Article 5 below, the Parent Corporation shall be merged with and into the
subsidiary Corporation, the separate existence of the Parent Corporation shall
cease and the Subsidiary Corporation shall continue in existence as the
surviving corporation; whereupon, without further act or deed, all the property,
real, personal and mixed, and franchises of the Parent Corporation and the
Subsidiary Corporation, and all debts due on whatever account of either of them,
including choses in action belonging to either of them, shall be taken and
deemed to be transferred to and vested in the Subsidiary Corporation. The
Subsidiary Corporation shall henceforth be responsible for all the liabilities
and obligations for the Parent Corporation and the Subsidiary Corporation, but
the liabilities of the Parent Corporation and the Subsidiary Corporation shall
not be affected, nor shall the rights of creditors thereof or of any persons
dealing with such corporations, or any liens upon the property of such
corporations, be impaired by the merger, and any existing claim of either at
such corporations nay be prosecuted to judgment as if the merger had not taken
place, or the Subsidiary Corporation may be proceeded against or substituted in
its place.
3. FURTHER ACTIONS. If any time the Parent Corporation or the subsidiary
----------------
Corporation shall consider or be advised that any further assignments,
conveyances or assurances in law are necessary or desirable to carry out the
provisions hereof, the proper officers and directors of the Parent Corporation
and the Subsidiary Corporation shall execute and deliver any and all proper
deeds, assignments and assurances in law, and do all things necessary or proper
to carry out the provisions hereof.
4. CONVERSION OF STOCK. On the effective date of the merger as set forth in
-------------------
Article 5 below, all of the issued and outstanding shares of stock of the
Subsidiary Corporation held in the name of the Parent Corporation shall be
canceled, and the issued and outstanding Common Stock, par value $.OO1, of the
Parent Corporation shall be converted into shares of Common Stock, par value
$.01, of the subsidiary Corporation as follows: each holder of Common Stock of
the Parent Corporation shall be entitled to receive one-tenth (1/10th) of a
share of the Common Stock, par value $.01, of the Subsidiary Corporation for
each share of Common Stock, par value $.001, so held in the Parent Corporation.
Certificates evidencing the number of shares of stock held by a shareholder in
the subsidiary Corporation shall be delivered as soon as practicable after
surrender by such shareholder of certificates evidencing all shares of stock
held in the Parent Corporation.
5. EFFECTIVE DATE. This Plan and Agreement of Merger and the merger herein
---------------
provided for shall become effective and the separate existence of the Parent
Corporation, except insofar as it
2
<PAGE>
may be deemed continued by statute, shall cease as soon as this Plan and
Agreement of Merger shall have been adopted, approved signed, and acknowledged
in accordance with the laws of the State of Delaware and the State of Colorado
and certificates of its adoption and approval shall have been executed in
accordance with such laws; and this Plan and Agreement of Merger shall have been
filed in the office of the Secretary of State of the State of Delaware and in
the office of the Secretary of State of the State of Colorado.
6. BOARD OF DIRECTORS AND OFFICERS. On the effective date of the merger,
--------------------------------
the officers and members of the Board of Directors of the Parent Corporation
shall resign, and the officers and members of the Board of Directors of the
Subsidiary Corporation shall continue in office. The officers and members of the
Board of Directors of the Subsidiary Corporation, and the respective positions
which they hold, shall not be changed or in any way affected by the merger.
7. SERVICE OF PROCESS. The Subsidiary Corporation agrees that it may be
------------------
served with process in the State of Delaware in any proceeding for enforcement
of any obligation of the Parent Corporation, as well as for enforcement of any
obligation of the Subsidiary corporation arising from the merger, including any
suit or other proceeding to enforce the right of any shareholders as determined
in appraisal proceedings pursuant to Section 262 of the Delaware General
Corporation taw, and the Subsidiary Corporation does hereby irrevocably appoint-
the Secretary of the State of Delaware as its agent to accept service of process
in any such suit or other proceedings. A copy of such process shall be mailed by
the Secretary of state of the State of Delaware to the following address:
DENTMART GROUP, INC.
3250 Wilshire Boulevard, Suite 900
Los Angeles, California 90010
Attention: President
8. ABANDONMENT. This Plan and Agreement of Merger may be abandoned by the
-----------
mutual consent of the parties hereto, acting each by its Board of Directors, at
any time prior to the effective date of the merger. Upon abandonment, this Plan
and Agreement of Merger shall become wholly void and of no effect and there
shall be no further liability or obligation hereunder on the part of either of
the parties hereto or its respective Board of Directors or shareholders.
9. COUNTERPARTS. This Plan and Agreement of Merger may be executed in any
------------
number of counterparts, each of which shall constitute an original instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties to this Plan and Agreement of Merger have
duly executed it on the day and year first above written.
DENTEART GROUP, INC DENTMART GROUP, INC.
("Subsidiary Corporation") ("Parent Corporation")
/S/ Patrick C. Brooks /S/ Patrick C. Brooks
- -------------------------------- --------------------------------
Patrick C. Brooks, President Patrick C. Brooks, President
ATTEST: ATTEST:
/S/ Stephanie A. Brooks /S/ Stephanie A. Brooks
- -------------------------------- --------------------------------
Stephanie A. Brooks, Secretary Stephanie A. Brooks, Secretary
4
<PAGE>
ARTICLES OF INCORPORATION
of
DENTMART GROUP, INC.
I, the undersigned natural person, of the age of eighteen years or more,
acting as an incorporator of a corporation under the Colorado Corporation Code,
adopt the following Articles of Incorporation.
1. The name of the corporation is:
DENTMART GROUP, INC.
2. The duration: of the Corporation is perpetual.
3. The Corporation is organized for any legal and lawful purpose pursuant to
the Colorado Corporation Code.
4. The aggregate number of shares which the Corporation shall have the
authority to issue is:
(a) 25,000,000 (Twenty-five Million) Shares of Common Stock having a value
of $.O1 per shares; and
(b) 2,000,000 (Two Million) Shares of Preferred Stock having a par value
of $.01 per share, such Preferred Stock being issuable in one or more
series as hereafter provided.
The preferences, restrictions and qualifications applicable to the Common
Stock and the Preferred Stock are as follows:
PART A - COMM0N STOCK
Each holder of Common Stock shall be entitled to one vote for each share of
Such stock standing in his name on the books of the Corporation.
After the payment or declaration and setting aside for payment of the full
cumulative dividends for all prior and then current dividend periods on all
outstanding shares of Preferred Stock and after setting aside all stock purchase
funds or sinking funds heretofore required to be set aside with respect to the
Preferred Stock, dividends on the Common Stock may be declared and paid, but
only when and as determined by the Board of Directors.
1
<PAGE>
On any dissolution, liquidation or winding up of the Corporation, after
there shall have been paid to or set aside for the holders of all outstanding
shares of preferred Stock the full preferential amount to which they are
respectively entitled to receive, pro rata in accordance with the number of
shares of each class outstanding, all the remaining assets of the Corporation
will be available for distribution to its shareholders.
The holders of Common Stock will have no redemption or conversion rights.
PART B - PREFERRED STOCK
The Board of Directors is expressly vested with the authority to divide any
Or all of the Preferred Stock into series and to fix and determine the relative
rights and preferences of the shares of each series so established, provided1
however, that the rights and preferences of the various series may vary only
with respect to:
(a) the rate of dividend;
(b) whether the shares may be called and, if so, the call price and the
terms and conditions of call;
(c) the amount payable upon the shares in the event of voluntary and
involuntary liquidation;
(d) sinking fund provisions, if any, far the call or redemption of the
shares;
(e) the terms and conditions, if any, on which the shares may be converted
(f) voting rights; and
(g) whether the shares will be cumulative, noncumulative or partially
cumulative as to dividends and the dates from which any cumulative
dividends are to accumulate.
The Board of Directors shall exercise the foregoing authority by adopting a
resolution setting forth the designation of each series and the number of shares
therein, and fixing and determining the relative rights and preferences thereof-
The Board of Directors may make any change in the designations, terms,
limitations or relative rights or preferences of any series in the same manner,
so long as no shares of such series are outstanding at such time.
Within the limits and restrictions, if any, stated in any resolution of the
Board of Directors originally fixing the number
2
<PAGE>
of shares constituting any series, the Board of Directors is authorized to
increase or decrease (but not below the number of stares of such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of such series. In case the number of shares of any series shall be so
decreased the share constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
5. The shareholders shall not be entitled to cumulative voting.
6. No holder of any stock of the Corporation shall be entitled, as a matter of
right, to purchase, subscribe for or otherwise acquire any new or additional
shares of stock of the Corporation for any class, or any options or warrants to
purchase, subscribe for or otherwise acquire any such new or additional shares,
or any shares, bonds, notes, debentures or other securities convertible into or
carrying options or warrants to purchase, subscribe for or otherwise acquire any
such new or additional shares.
7. The address of the initial registered office of the Corporation is 523 North
Nevada Avenue, Colorado Springs, Colorado 80903, and the name of the initial
registered agent is James A. Mundt.
8. The address of the place of business of the Corporation is 1701 Altivo Way,
Los Angeles, California 90025.
9. The number of directors of the Corporation shall be not less than three;
except that there need be only as many directors as there are, or initially will
be, shareholders in the event that the outstanding shares are, or initially will
be, held of record by fewer than three shareholders.
The number of directors constituting the initial Board of Directors of the
Corporation is two and the names and addresses of the persons who are to serve
as directors until the first annual meeting of shareholders or until their
successors are elected and shall qualify are:
NAME ADDRESS
---- -------
Patrick C. Brooks 1701 Altivo Way, Los Angeles,
California 90026
Stephanie A. Brooks 1701 Altivo way1 Los Angeles,
California 90026
10. The shareholders of the Corporation may take any action which they are
required or permitted to take without a meeting on written consent, setting
forth the action so taken, signed by all of the persons or entities entitled to
vote thereon.
3
<PAGE>
11. A. Any Business Combination Transaction (as defined in Section 11.3(3)
below) shall require the affirmative vote at the holders of at least 75% of the
voting power of all of the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors, voting together as a
single class. Such affirmative vote shall be required, notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or in any agreement with any national securities exchange or otherwise.
B. For the purposes of this Paragraph 11:
(1) "Affiliate" of "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on December 31, 1985
(2) "Beneficial owner" shall have the meaning ascribed to such term
in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on December 31, 1985
(3) "Business Combination Transaction" shall mean:
(a) any merger or consolidation of the Corporation or any
Subsidiary with (i) an Interested Stockholder or (ii) any
other Person (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate or Associate of an Interested Stock
holder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with or proposed by or on behalf at, an
Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, of any assets of the Corporation or
any Subsidiary constituting not less than 5% of the total
assets of the Corporation as reported in the consolidation
balance sheet of the Corporation as of the end of the most
recent quarter with respect to which such balance sheet has
been prepared; or
(c) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions)
of any securities of the Corporation or any Subsidiary to,
or
4
<PAGE>
proposed by or on behalf of an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder in
exchange for cash, securities or other property (or a
combination thereof) constituting not less than 5% of the
total assets of the Corporation as reported in the
consolidated balance sheet of the Corporation as of the end
of the most recent quarter with respect to which such
balance sheet has been prepared; or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or any spin-off or split-up
of any kind of the Corporation or any Subsidiary, proposed
by or on behalf of an Interested Stockholder or an Affiliate
or Associate of an Interested Stockholder; or
(e) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any
Subsidiary or any other transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which
has the effect, directly or indirectly, of increasing the
percentage of the outstanding shares of (i) any class of
equity securities of the Corporation or any Subsidiary or
(ii) any class of securities of the Corporation or any
Subsidiary convertible into equity securities of the
Corporation or any Subsidiary, represented by securities of
such class which are directly or indirectly owned by an
Interested Stockholder and all of its Affiliates and
Associates.
(4) "Continuing Director" means (a) any member of the Board of
Directors of the Corporation who (i) is neither the Interested
Stockholder involved in the Business Combination Transaction as
to which a vote of Continuing Directors is provided hereunder,
nor an Affiliate, Associate, employee, agent, or nominee of such
Interested Stockholder, or the relative of any of the foregoing,
and (ii) was a member of the Board of Directors of the
Corporation prior to the time that such Interested Stockholder
became an Interested Stockholder, and (b) any successor of a
Continuing Director described in clause (a) who is recommended
or elected
5
<PAGE>
to succeed a continuing Director by the affirmative vote of a
majority of Continuing Directors then on the Board of Directors
of the Corporation.
(5) "Fair Market Value" means: (a) in the case of stock, the
highest closing sale price during the 3O-dEy period immediately
preceding the date in question of a share of such stock on the
composite Tape or, if such stock is not reported on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, in the principal United States
securities exchange registered under the Exchange Act on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a
share of such stock during the 30-day period preceding the date
in question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any similar interdealer
quotation system then in use, or, if no such quotation is
available, the fair market value on the date in question of a
share of such stock as determined by a majority or the Continuing
Directors in good faith; and (b) in the case of property other
than cash or stock, the fair market value of such property on the
date in question as determined by a majority of the Continuing
Directors in good faith.
(6) "Interested Stockholder" shall mean any Person (other than the
corporation or any Subsidiary, any employee benefit plan
maintained by the Corporation or any Subsidiary or any trustee or
fiduciary with respect to any such plan when acting in such
capacity) who or which:
(a) is or was at any time within the two-year period immediately
prior to the date in question, the Beneficial Owner,
directly or indirectly, of 10% or more of the voting power
of the then outstanding Voting Stock of the Corporation; or
(b) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in
question was the Beneficial Owner, directly or indirectly,
of 10% or more of the voting power of the outstanding Voting
Stock of the Corporation; or
(c) is an assignee of, or has otherwise succeeded to, any
shares of Voting stock of the
6
<PAGE>
corporation of which an Interested Stockholder 'as the
Beneficial Owner, directly or indirectly, at any time within
the two-year period immediately prior to the date in
question, if such assignment or succession shall have
occurred in the course of a transaction, or series of
transactions, not involving a public offering within the
meaning of the Securities Act of 1933, as amended.
For the purpose of determining whether a Person is an Interested Stockholder,
the outstanding Voting Stock of the Corporation shall include unissued shares of
Voting Stock of the Corporation of which the Interested Stockholder is the
Beneficial Owner but shall not include any other shares of Voting Stock of the
Corporation which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or ontions1 or
otherwise, to any Person who is not the Interested Stockholder
(7) A11 Person means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity,
as well as any syndicate or group deemed to be a person pursuant
to Section 14(d)(2) of the Exchange Act-
(8) "Subsidiary" means any corporation of which the Corporation owns,
directly or indirectly, (a) a majority of the outstanding shares
of equity Securities of such corporation, or (b) shares having a
majority of the voting power represented by all of the
outstanding Voting Stock of such corporation. For the purpose of
determining whether a corporation is a Subsidiary, the
outstanding Voting Stock and shares of equity securities thereof
shall include unissued shares of which the Corporation is the
Beneficial Owner but, except for the purposes of Paragraph
11.B(6), shall not include any other shares which may be issuable
pursuant to any agreement, arrangement or under- standing, or
upon the exercise of conversion rights, warrants or options, or
otherwise, to any Person who is not the Corporation
(9) "Voting Stock" shall mean outstanding shares of capital stock of
the relevant corporation entitled to vote generally in the
election of directors.
C. The provisions of Paragraph 1l.A shall not be applicable to any
particular Business Combination Transaction, and such Business
combination Transaction shall require
7
<PAGE>
only such affirmative vote of the 5bockholders, if the conditions
specified in either of the following paragraphs (1) and (2) are met
(1) The Business Combination Transaction shall have been approved by
the affirmative vote of a majority of the Continuing Directors1
even if the Continuing Directors do not constitute a quorum of
the entire Board of Directors
(2) All of the following conditions shall have been met
(a) With respect to each share of each class of outstanding
Voting Stock of the Corporation (including Common Stock),
the holder thereof shall be entitled to receive on or before
the date of the consummation of the Business Combination
Transaction (the 'Consummation Date"), cash and
consideration, in the form specified in paragraph 1l.C(2)(b)
hereof, with an aggregate Fair Market Value as of the
Consummation Date at least equal to the hiqhest of the
following;
(i) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder to which the
Business Combination Transaction relates or by any
Affiliate or Associate of such Interested stock-
holder, for any shares of such class of Voting Stock
acquired by it (x) within the two-year period
immediately prior to the first public announcement of
the proposal of the Business Combination Transaction
(the "Announcement Date") or (y) in the transaction in
which it became an Interested Stockholder, whichever is
higher;
(ii) the Fair Market Value per share of such class voting
Stock of the Corporation on the Announcement Date; and
(iii)the highest preferential amount per share, if any, to
which the holders of shares of such class of Voting
Stock of the Corporation are entitled in the event of
any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation.
8
<PAGE>
(b) The consideration to be received by holders of a particular
class of outstanding Voting Stock of the corporation
(including Common Stock) as described in Paragraph
11.C(2)(a) hereof shall be in cash or, if the consideration
previously paid by or on behalf of the Interested
Stockholder in connection with its acquisition of beneficial
ownership of shares of such class of Voting Stock consisted,
in whole or in part, of consideration other than cash, then
in the same form as such consideration. If such payment for
hares of any class of Voting Stock of the Corporation has
been made in varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either
cash or the form used to acquire the beneficial ownership of
the largest number of shares of such class of Voting Stock
previously acquired by the Interested Stock- holder
(c) After such Interested Stockholder has become an Interested
stockholder and prior to the Consummation Date: (i) there
shall have been no failure to declare and pay at the regular
date therefor any full dividends (whether or not cumulative)
on the outstanding Preferred Stock of the Corporation, if
any, except as approved by the affirmative vote of a
majority of the Continuing Directors; (ii) there shall have
been (x) no reduction in the annual rate of dividends paid
on the Common Stock of the Corporation (except as necessary
to reflect any subdivision of the Common Stock), except as
approved by the affirmative vote of a majority of the
Continuing Directors, and (y) an increase in such annual
rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to
increase such annual rate is approved by the affirmative
vote of a majority of the Continuing Directors; and (iii)
such Interested Stockholder shall not have become the
Beneficial Owner of any additional shares of Voting Stock of
the Corporation except as part of the transaction which
results in such Interested Stockholder becoming an
Interested Stock-holder.
9
<PAGE>
(d) After such Interested Stockholder has become an interested
stockholder, neither such Interested Stockholder nor any
Affiliate or Associate thereof shall have received the
benefit, directly or indirectly (except proportionately as
shareholder of the Corporation) of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation
(e) A proxy or information statement describing the proposed
Business Combination Transaction and complying with the
requirements of the Exchange Act and the General Rules and
Regulations thereunder (or any subsequent provisions
replacing such Act, Rules or regulations) shall be mailed to
the shareholders of the Corporation at least 30 days prior
to the Consummation Date (Either or not such proxy or
information statement is required to be mailed pursuant to
such Act or subsequent provisions thereof)
D. A majority of the Continuing Directors shall have the power and duty
to determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine compliance with
this Paragraph 11, including, without limitation, (1) whether a Person
is an interested stockholder, (2) the number of shares of Voting Stock
of the Corporation beneficially owned by any Person, (3) whether a
Person is an Affiliate or Associate of another, (4) whether the
requirements of Paragraph l1.C(2) have been met with respect to any
Business Combination Transaction, and (5) whether the assets which are
the subject of any Business Combination Transaction have, or the
consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business
Combination Transaction constitutes not less than 5% of the total
assets of the Corporation as reported in the consolidated balance
sheet of the Corporation as of the end of the most recent quarter with
respect to which such balance sheet has been prepared. The good faith
determination of a majority of the Continuing Directors on such
matters shall be conclusive and binding for all the purposes of this
Paragraph 11
E. Nothing contained in this Paragraph shall be construed to relieve the
members of the Board of Directors or an interested stockholder from
any fiduciary obligation imposed by law. The fact that any Business
Combination
10
<PAGE>
Transaction complies with the provisions of Paragraph 11.c shall not
be construed to impose any fiduciary duty, obligation or
responsibility on the Board of Directors, or any member thereof, to
approve such Business Combination Transaction or recommend its
adoption or approval to the shareholders of the Corporation, nor shall
such compliance limit, prohibit or otherwise restrict In any manner
the Board of Directors, or any member thereof, with respect to
evaluations of or actions and responses taken with respect to such
Business Combination Transactions
12. In the event the Board of Directors should consist of in excess of two
directors, the Board of Directors shall be divided into three classes as nearly
equal in number as possible. The initial terms of directors elected in 1991
shall expire as of the annual meeting of shareholders for the years indicated
below:
Class I Directors 1994
Class II Directors 1993
Class III Directors 1992
Upon expiration of the initial terms specified for each class of directors,
their successors shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain or attain if possible, the equality of the number of
directors in each class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. If an equality in number
is not possible, the increase or decrease shall be apportioned among the classes
in such a way that the difference in the number of directors in any two classes
shall not exceed one.
Any vacancies in the Board of Directors for any reason and any newly created
directorships resulting by reason of any increase in the number of directors
shall be filled by the Board of Directors, acting by a majority of the remaining
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which such
directors have been chosen arid until their successors are elected and qualified
A written ballot shall not be required for the election of directors unless the
bylaws of' the Corporation so provide
13. A quorum of the Board of Directors of the Corporation shall consist of two
directors, but in the event that the Board should consist of in excess of six
directors1 one-third of the directors in office shall constitute a quorum
14. In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized:
11
<PAGE>
(a) To adopt, amend or repeal the Bylaws of the Corporation by vote of a
majority of the members of the Board of Directors, but any Bylaws
adopted by The Board of Directors may be amended or repealed by the
shareholders of the Corporation
(b) To distribute to the shareholders of the Corporation out of capital
surplus of the Corporation a portion of its assets, in cash or
property1 subject to the requirements of law, and such distribution is
expressly permitted without the vote of the shareholders;
(c) To cause the Corporation to make purchases of its shares, directly or
indirectly, to the extent of unreserved and unrestricted earned
surplus available therefor, without the vote of the shareholders
(d) If at any time the Corporation has more than one class of authorized
or outstanding stock, to pay dividends in shares of any class to the
holders of shares of any class without the vote of the shareholders of
the class in which the payment is to be made; and
(e) To take any action which the Board of Directors is required or
permitted to take without a meeting by written consent, setting forth
the action so taken, signed by all of the directors entitled to vote
thereon
15. In evaluating a Business Combination (as defined in Paragraph 11 above) or a
tender or exchange transaction and other acquisition proposal, the Board of
Directors in determining what is in the best interest of the Corporation, may
consider, among others, the following factors
(a) the financial aspects of the offer, the long-term interests of the
Corporation1s shareholders, the present and historical market value of
the Corporation's shares and the premiums paid in other relevant
transactions, the liquidation value of the Corporation's assets and
component operations, the prospects of the Corporation, and (to the
extent estimable) its stock on a going- concern basis over the
subsequent several years;
(b) the prospects for obtaining and methods of achieving a better offer,
such as seeking other bids, pursuing negotiating strategies (which may
include defensive tactics), and partial or total liquidation
(c) the impact, if the offer is partial or two-tier, on the remaininq
shareholders and on the -prospects of the Corporation in the event the
offer is successful;
12
<PAGE>
(d) the value and investment attributes of the noncash consideration if
the offer involves consideration other than cash;
(e) the potential of the offer (if partial of two-tier), including the
offeror's competence, experience, integrity, management, reputation
and financial condition;
(f) legal and regulatory matters, or other considerations that could
impede or prevent considerations transaction consummation;
(g) the effect of the transaction on the Corporation's (and its
Subsidiaries') customers, including policyholders, suppliers and
employees; and
(h) 1ocal community interests.
16. The affirmative vote of the holders of at least 75% of the voting power of
all of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend, alter, change or repeal, or adopt any provision or
provisions inconsistent with any provision of Paragraphs 11, 12, 13 or 14
hereof, unless such amendment, alteration, change, repeal or adoption of any
inconsistent provision or provisions is declared advisable by the Board of
Directors by the affirmative vote of (A) three quarters of the entire Board of
Directors and (B) a majority of the Continuing Directors (as defined in
Paragraph 11).
17. The name and address of the incorporator is as follows:
Name Address
---- -------
Patrick C. Brooks 1701 Altivo Way
Los Angeles, CA 90026
13
<PAGE>
IN WITNESS WHEREOF, the above named Incorporator signed these ARTICLES OF
INCORPORATION on 15th January, 1991.
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
I, the undersigned, a notary public1 hereby certify that on 15th January
1991, the above named Incorporator personally appeared before Me and being by me
first duly sworn declared that he is the person who signed the foregoing
document as Incorporator and that the statements therein contained are true.
WITNESS my hand and official seal.
My commission expires
--------------------------------
------------------------------------
Notary Public
[Official Notary Public Seal]
14
<PAGE>
ADMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
DENTMART GROUP, INC.
DENTMART GROUP, INC., a Colorado corporation (the "Corporation") hereby
adopts, pursuant to C.R.S. 1973, Section 7E2- 106, the following amendment of
its Articles of Incorporation. The amendment made hereby has been made in
conformity with the provisions of the Colorado Corporation Code.
Such amendment was adopted on May 15, 1991, by a vote of shareholders. The
number of shares voting for this amendment was sufficient for approval, the
number required for such approval being a majority of the outstanding shares of
the Corporation.
Pursuant to the foregoing, the Corporation does hereby amend the first
sentence of Paragraph 4 of its Articles or Incorporation, which sentence now
reads:
"4. Effective on the date upon which this Amendment to the Articles of
Incorporation is duly filed with the Secretary of State of the State of
Colorado (the "Effective Date"), each share of the common Stock, s-al par
value, authorized and outstanding on the Effective Date shall be combined,
reconstituted, and converted by reverse stock split into one- fifth (115th)
share of Common Stock, $.05 par value. The Board of Directors is authorized
to determine by resolution all matters reasonably required by, or ancillary
to, said reverse stock split, including but not limited to the manner and
terms upon which new share certificates shall be issued, certificates far
existing share certificates shall be surrendered, and fractional shares (if
any) shall be issued. Upon the occurrence of said reverse stock split, the
maximum number of shares which the Corporation shall have the authority to
issue is:
(a) 5,000,000 (Five Million) Shares of Common stock having a par value
of $-05 per share; and
(b) 2,000,000 (Two Million) Shares of Preferred Stock having a par
value of $.0l per share, such Preferred Stock being issuable in one or more
series as hereinafter provided.4'
Page 1 of 2
<PAGE>
To read in full as follows:
"The aggregate number of shares which the Corporation shall have the
authority to issue is: (a) 25,000,000 (Twenty-five Million) Shares of
Common Stock having a value of $.01 per share; and (b) 2,000,000 (Two
Million) shares of Preferred Stock having a par value of $.01 per share,
such Preferred Stock being issuable in one or more series as hereafter
provided."
Respectfully submitted:
Date: May 16, 1991 /s/ Patrick C. Brooks
-----------------------------
Patrick C. Brooks, president
Date: May 16, 1991 /s/ Stephanie A. Brooks
------------------------------
Stephanie A. Brooks, Secretary
The undersigned, Stephanie A. Brooks, being Secretary of DENTMART GROUP,
INC., hereby certifies that the above stated representations are correct and
that the signatures of myself and Patrick C. Brooks are correct and signed in
our official capacities as Secretary and President of DENMART GROUP, INC.,
respectively.
Signed this 16th day of May, 1991.
/s/ Stephanie A. Brooks
------------------------------
Stephanie A. Brooks, Secretary
Page 2 of 2
<PAGE>
AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
DENTMART GROUP, INC.
DENTMART GROUP, INC., a Colorado corporation (the "Corporation") hereby
adopts, pursuant to C.R.S. 1973, section 7-2- 106r the following amendment of
its Articles of Incorporation. The amendment made hereby has been made in
conformity with the provisions of the Colorado Corporation Code.
Such amendment was adopted on May 20, 1991, by a vote of shareholders. The
number of shares voting for this amendment was sufficient for approval, the
number required for such approval being a majority of the outstanding shares of
the Corporation.
Pursuant to the foregoing, the corporation does hereby amend the first
sentence of Paragraph 4 of its Articles of Incorporation, which sentence now
reads, "The aggregate number of shares which the Corporation shall have the
authority to issue is: (a) 25,000,000 (Twenty-five Million) Shares of Common
Stock having a value of $.0l per share; and (b) 2,000,000 (Two Million) Shares
of Preferred Stock having a par value of $.01 per share, such Preferred Stock
being issuable in one or more series as hereafter provided." to read in full as
follows:
"4. Effective on the date upon which this Amendment to the Articles of
Incorporation is duly tiled with the Secretary of State of the State of
Colorado (the "Effective Date"), each share of the Common Stock, $.01 par
value, authorized and outstanding on the Effective Date shall be combined,
reconstituted, and converted by reverse stock split into one- fifth (1/5th)
share of common stock, $.05 par value. The Board of Directors is authorized
to determine by resolution all matters reasonably required by, or ancillary
to, said reverse stock split, including but not limited to the manner and
terms upon which new share certificates shall be issued, certificates for
existing share certificates shall be surrendered, and fractional shares (if
any) shall be issued.
Page 1 of 2
<PAGE>
Upon the occurrence of said reverse stock split, the maximum number of
shares which the corporation shall have the authority to issue is:
(a) 5,000,000 (Five Million) Shares of Common Stock having a par value
of $.05 per share; and
(b) 2,000,000 (Two Million) Shares of Preferred Stock having a par
value of $.01 per share, such Preferred Stock being issuable in one or more
series as hereinafter provided."
Respectfully submitted:
Date: May 21, 1991 /s/ Patrick C. Brooks
-------------------------------
Patrick C. Brooks, President
Date: May 21, 1991 /s/ Stephanie A. Brooks
------------------------------
Stephanie A. Brooks, Secretary
The undersigned, Stephanie A. Brooks, being Secretary of DENTMART
GROUP, INC., hereby certifies that the above stated representations are
correct and that the signatures of myself and Patrick C. Brooks are correct
and signed in our official capacities as Secretary and President of
DENTMART GROUP, INC., respectively.
Signed this 21st day of May, 1991.
/s/ Stephanie A. Brooks
------------------------------
Stephanie A. Brooks, Secretary
Page 2 of 2
<PAGE>
BYLAWS OF
DENTMART GROUP, INC.
ARTICLE
Identification
--------------
Section 1.01 Name. The name of this corporation is DENTMART GROUP, INC. The
----
Corporation may conduct operations under such other trade names as the Board of
Directors may designate.
Section 1.02 Seal. The corporation shall be authorized, but not required,
----
to use a corporate seal, which if used shall be circular in form and contain the
name of the Corporation and the words "Corporate Seal". The corporate seal shall
be affixed by the Secretary upon such instruments or documents as may be deemed
necessary. The presence or absence of such seal on any instrument shall not,
however, affect its character or validity or legal effect in any respect
Section 1.03 Offices. The registered office shall be at 523 North Nevada
-------
Avenue, Colorado Springs, State of Colorado. The Corporation may also have
offices at such other places as the Board of Directors may from time to time
determine or the business of the corporation may require
The books of the Corporation may be kept subject to any provision contained
in the statutes) outside the State of Colorado at such place or places as may be
designated from time to time by the Board of Directors
Section 1.04 Fiscal Year. The fiscal year of the Corporation shall be the
-----------
calendar year, unless otherwise established by the Board of Directors.
ARTICLE 2
Capital Stock
-------------
Section 2.01 Consideration for Shares. Except as other wise permitted by
------------------------
law, the Capital Stock having par value may be issued for such consideration,
expressed in dollars, not less than the par value thereof, as shall be fixed
from time to time by the Board of Directors. Treasury shares may be disposed of
by the corporation for such consideration expressed in dollars as may be fixed
from time to time by the Board of Directors
Except as otherwise permitted by law, Capital Stock without par value may
be issued for such consideration as may be fixed by
Bylaws - 1
<PAGE>
the Board of Directors, all of which consideration shall constitute stated
capital unless prior to or within sixty (60) days after issuance the Board of
Directors allocates to capital surplus a portion, but not all, of such
consideration.
Section 2.02 Payment for Shares. The consideration for the issuance of
------------------
shares may be paid, in whole or in part, in money, in other property, tangible
or intangible, or in labor or services already performed tar the corporation.
when payment of the consideration for which shares are to be issued shall have
been received by the Corporation, such shares shall be deemed to be fully paid
and nonassessable. Neither promissory notes nor future services shall constitute
payment or part payment for shares of the Corporation. In absence of fraud in
the transaction, the judgment of the Board of Directors as to the value of the
consideration received for shares shall be conclusive. No certificate shall be
issued for any share until the share is fully paid.
Section 2.03 Certificate Representing Shares. The certificates of stock of
--------------------------------
the Corporation shall be numbered consecutively and entered in the books of the
Corporation as they are issued. Each holder of the Capital Stock of the
Corporation shall be entitled to a certificate exhibiting the holder's name and
number of shares and signed by the President or a Vice President and the
Secretary of the Corporation certifying the number of shares owned by him in the
Corporation. Where any such certificate is signed by a transfer agent the
signature of either or both of such officers may be facsimile, engraved or
printed. Each certificate shall have noted thereon any restriction on voting or
transferability or any preference or call provision.
ARTICLE 3
Meetings of Shareholders
------------------------
Section 3.01 Place of Meeting. The Board of Directors may designate any
----------------
place for any annual meeting or for any special meeting called by the Board of
Directors.
Section 3.02 Annual Meeting. The annual meeting of the shareholders shall
--------------
be held within 120 days after the close of the fiscal year of the Corporation,
at which annual meeting the shareholders shall elect a Board of Directors and
transact such other business as may properly come before the meeting. Failure to
bold the annual meeting within the designated time shall not work a forfeiture
or dissolution of the Corporation. As permitted by the Articles of Incorporation
and Article 7 of these Bylaws, the shareholders may take action by consent in
lieu of the annual meeting.
Bylaws - 2
<PAGE>
Section 3.03 Special Meetings. Special meetings of the shareholders may be
----------------
called by the president and shall be called by the Secretary or any other
officer at the request in writing of a majority of the Board of Directors or the
holders of not less than one-third (1/3) of all shares entitled to vote at the
meeting. Any written request for a meeting shall state the purpose or purposes
of the proposed meeting and no action other than that specified in the notice
may be considered.
Section 3.04 Notice of Meetings - waiver. Written notice stating the place,
------------------
day, and hour of the meeting, and in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten,
nor more than forty, days before the date of the meeting, either personally or
by mail to each shareholder entitled to vote at such meeting. Waiver by a
shareholder in writing or by telegram of notice of a shareholders' meeting,
signed by him, whether before or after the time of the meeting, shall be
equivalent to the giving of such notice. Attendance by a shareholder, without
objection to the notice, whether in person or by proxy, at a shareholders'
meeting shall constitute a waiver of notice of the meeting.
Section 3.05 Record Date. In determining the shareholders entitled to
------------
notice of and to vote at any annual or special meeting of shareholders, the
stock transfer books of the Corporation shall not be closed, but in lieu thereof
the Board of Directors shall fix a date no Less than ten nor more than sixty
days before any such meeting as a record date and only the shareholders whose
names appear on the stock transfer books at the close of business on that date
shall be entitled to notice of and to vote at such meeting, notwithstanding the
transfer of shares thereafter.
Section 3.06 Quorum. A majority of the shares entitled to vote, represented
------
in person or by proxy, shall constitute a quorum at a meeting of shareholders.
The shareholders present at a duly organized meeting may continue to do business
until adjournment, notwithstanding the '4ithdrawal of a number of shareholders
so that less than a quorum remains. A meeting may be adjourned despite the
absence of a quorum.
Section 3.07 Proxies and Voting. Unless otherwise provided by the Articles
------------------
of Incorporation, each shareholder entitled to notice of and to vote at a
meeting of shareholders shall be entitled to one vote for each share of Capital
Stock standing in his name on the transfer books of the corporation on the
record date fixed for such meeting. A shareholder may vote either in person or
by proxy executed in writing by the shareholder. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Bylaws - 3
<PAGE>
Section 3.08 Shareholder List. The Secretary of the Corporation shall
-----------------
produce at each meeting of shareholders a list of the shareholders entitled to
notice of and to vote at such meeting
Section 3.09 Order of Business. Unless otherwise specified by the Chairman
------------------
of the Board or the chairman of the meeting, the order of business at the annual
meeting. and as far as practicable, at all other meetings of the shareholders,
shall be (1) calling of roll, (2) proof of due notice of meetings, (3) reading
and disposal of any unapproved minutes, (4) annual reports of officers and
committees, (5) election of directors, (6) unfinished business, (7) new business
and (8) adjournment. The Chairman of the 'Board shall preside at all meetings of
the shareholders and in his absence the President or his designate.
ARTTCLE 4
The Board at Directors
----------------------
Section 4.01 General Powers. The business and affairs of the Corporation
---------------
shall be managed by a Board of Directors. The directors shall in all cases act
as a board and they may adopt such rules and regulations for the conduct of
their meetings and the management of the Corporation, as they may deem proper,
not inconsistent with these Bylaws and the laws of this state.
Section 4.02 Number, Qualifications and Tenure. The number of directors of
----------------------------------
the Corporation shall be a minimum of two and a maximum of twelve persons.
Directors need not be residents of the State of Colorado or shareholders of the
Corporation.
The Board of Directors shall be divided into three classes as nearly equal
in number as possible. The initial terms of directors elected in 1991 shall
expire as of the annual meeting of shareholders for the years indicated below
Class I Directors 1994
Class II Directors 1993
Class III Directors 1992
Upon expiration of the initial term specified for each class of directors,
their successors shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain or attain, if possible, the equality of the number of
directors in each class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. If an equality in number
is not possible, the increase or decrease shall be apportioned among the classes
in such a way that the difference in the number of directors in any two classes
shall not exceed one.
Bylaws - 4
<PAGE>
Section 4.03 Removal of Directors. Directors may be removed from office at
--------------------
any time by a majority vote of the shareholders at their annual meeting, or at a
special meeting called for the purpose, and may be removed for cause at any time
by a majority of the Board of Directors at its annual meeting, or at a special
meeting called for the purpose.
Section 4.04 Vacancies. Any vacancies in the Board of Directors for any
---------
reason and any newly created directorships resulting by reason of any increase
in the number of directors shall be filled by the Board of Directors, acting by
a majority of the remaining directors then in office, although less than a
quorum, and any directors so chosen shall hold office until the next election of
the class for which directors have been chosen and until their successors are
elected and qualified.
Section 4.05 Place of Meeting. Meetings of the Board of Directors, annual,
----------------
regular, or special, may be held either within or without the State of Colorado
at such place as shall be designed by the Board of Directors and stated in the
notice of the meeting.
Section 4.06 Annual and Regular Meetings. Subject to the authority of the
----------------------------
Board to take action by consent as permitted by the Articles of Incorporation
immediately after the annual meeting of the shareholders, the Board of Directors
shall meet each year for the purpose of organization, election of officers, and
consideration of any other business that may properly be brought before the
meeting. Regular meetings shall be held at such time and place as the Board of
Directors may determine. No notice of any kind to either old or new members of
the Board of Directors for the annual meeting or any regular meeting shall be
required.
Section 4.07 Special Meetings. Special meetings of the Board of Directors
-----------------
may be held upon notice by letter, telegram, cable, or radiogram, delivered for
transmission not later than during the third day immediately preceding the day
for the meeting, or by word or mouth, telephone, or radiophone received not
later than during the second day immediately preceding the day For the meeting,
upon the call of a majority of the Directors, the chairman of the Board, the
president or the Secretary of the Corporation. Special meetings shall be called
by the President, any Vice President or the Secretary in a like manner upon the
written request of a majority of the Directors. Attendance in person at a
special meeting without objection to the notice shall constitute a waiver of
notice of the meeting. Notice of any meeting of the Board of Directors may be
waived orally if confirmed in writing or by telegram signed by the person
entitled to the notice, whether before or after the time of the meeting. Neither
the business to be Transacted at, nor the purpose of. any meeting of the Board
of Directors need be specified in the notice or waiver of notice of the meeting.
Bylaws - 5
<PAGE>
Section 4.08 Quorum and Voting. A majority of the Board of Directors shall
-----------------
constitute a quorum for the transaction of business. The act of the majority of
the Directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors unless the act of a greater number is required by
these Bylaws or by the law.
Section 4.09 Telephone Conferences. Members of the Board of Directors, or
---------------------
any committee designated by the Board, may participate in a meeting of such
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this subsection shall
constitute presence in person at such meeting.
Section 4.10 Chairman of the Board. At its annual organization meeting, the
---------------------
Board of Directors shall 'elect by vote of a majority of the entire Board a
Chairman of the Board who shall preside at all meetings of the Board.
Section 4.11 Committees. The Board of Directors, by resolution adopted by a
----------
majority of the Directors, may designate and appoint an Executive Committee or
other committees from its members and may delegate to such Committee or
committees such authority as is consistent with these Bylaws and permitted by
law.
ARTICLE 5
The Officers
------------
Section 5.01 Officers. The officers of the Corporation shall consist of a
--------
President and Secretary and. as deemed appropriate by the Board of Directors,
one or more Vice Presidents, Assistant secretaries, Treasurers, Assistant
Treasurers, and such other officers and assistant officers and agents as may be
deemed necessary by the Board of Directors. Any two or more offices may be held
by the same person, except the offices of President and Secretary. Officers need
not be Directors or shareholders of the corporation.
Section 5.02 Vacancies. Vacancies occurring in any office shall be filled
---------
by the Board of Directors at any regular or special meeting.
Section 5.03 The President. The President shall be the chief executive
--------------
officer and have active executive management and supervision of the operations
of the Corporation. He shall perform such duties as these Bylaws provide or the
Board of Directors may prescribe or his capacity as chief executive officer by
custom may provide.
Bylaws - 6
<PAGE>
Section 5.04 The Vice President. The Vice President or Vice Presidents, in
------------------
the order designated by the Board of Directors, shall be vested with all the
executive powers and required to perform all the duties of that portion or area
of responsibility of the president and shall perform such other duties as may be
prescribed by the Board of Directors. Each vice President shall report to the
President or his delegate who shall be responsible for the Vice President's
actions.
Section 5.05 The Secretary. The Secretary shall attend all meetings of the
-------------
shareholders and of the Board of Directors and shall keep a true and complete
record of the proceedings of these meetings. He shall be custodian of the
records of the Corporation. He shall attend to the giving of all notices,
attest, when requested, to the authority of the President or other officers, as
revealed by the minutes or these Bylaws, to execute legal documents binding the
corporation, and shall perform such other duties as these Bylaws may provide or
the Board of Directors may prescribe.
Section 5.06 The Treasurer. The Treasurer shall keep correct and complete
-------------
records of account, showing accurately at all times the financial condition and
results of operation of the corporation. Ire shall be the legal custodian of all
moneys, notes, securities and other valuables that may from time to time come
into possession of the Corporation. He shall immediately deposit all funds of
the Corporation coming into his hands in some reliable bank or other depository
to be designated by the Board of Directors, and shall keep this bank account in
the name of the Corporation. He shall furnish at meetings of the Board of
Directors, or whenever requested, a statement of the financial condition and
results of the Corporation, and shall perform such other duties as these Bylaws
may provide or the Board of Directors may prescribe. The Treasurer may be
required to furnish bond in such amount as shall be determined by the Board of
Directors.
Section 5.07 Other Officers. The duties of other officers elected by the
---------------
Hoard of Directors shall be such as are customary to their respective offices
and as shall be given them by the President.
ARTICLE 6
Special Corporate Acts
----------------------
Negotiable Instruments, Deeds and Contracts
-------------------------------------------
All checks, drafts, notes, bonds, bills of exchange, and orders for the
payment of money of the Corporation; all deeds, mortgages, and other written
contracts and agreements to which the Corporation shall be party; and all
assignments or
Bylaws - 7
<PAGE>
endorsements of stock certificates, registered bonds, or other securities owned
by the Corporation( shall, unless otherwise directed by the Board of Directors,
be signed by the chief executive officer of this Corporation. The Board of
Directors or such officer may, however, designate other officers, directors or
employees off the Corporation to sign such instruments in the name of the
Corporation and may authorize the use of facsimile signatures of any such
persons. Any shares of stock issued by any other corporation and owned or
controlled by the Corporation may be voted in accordance with instructions
approved by the Board of Directors, at any shareholders' meeting of the other
corporation by the chief executive officer of the Corporation, if he be present
or. in his absence, by such person as he shall, by duly executed proxy,
designate to represent the corporation at such shareholders' meeting
ARTICLE 7
Action Without Meeting
----------------------
Any action which properly may be taken by the directors, shareholders or
subscribers before there are shareholders may be taken without a meeting on
written consent, setting forth the action so taken, signed by all the persons or
entities entitled to vote thereon
ARTICLE 8
The Corporation shall indemnify any person (including his estate) made or
threatened to be made a party to any suit or proceeding, whether civil or
criminal, by reason of the fact that he was a director or officer of the
Corporation or served at its request as a director or officer of the Corporation
or served at its request as a director or officer of another Corporation,
against judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney fees actually and necessarily incurred as a result of such
threat, suit or proceeding, or any appeal therein, to the full extent permitted
by the Colorado Corporation Code. Promptly after receipt by a party to be
indemnified under this section of notice of the commencement of any such suit or
proceeding, such party will1 it a claim En respect thereof is to be made against
this Corporation, notify the Corporation of the commencement thereof. This
Corporation shall be entitled to participate at its own expense in the defense
or to assume the defense of any such suit or proceeding. In the event this
Corporation elects to assume the defense of any such suit or proceedings, such
defense shall be conducted by counsel chosen by it and reasonably satisfactory
to the party to be indemnified and the party to be indemnified shall bear the
fees and expenses of any additional counsel retained by him
Bylaws - 8
<PAGE>
ARTICLE 9
Amendments
----------
These Bylaws may be altered, amended or repealed and new Bylaws adopted by
the affirmative vote of the holders of a majority of the outstanding stock at
any regular meeting of the shareholders or special meeting called for the
purpose, or by the affirmative vote of a majority of the entire Board of
Directors at any regular or special meeting of the Board, provided, however,
that if any shareholder or Director, as the case may be, should object to the
consideration of any proposed amendment, the proposal may not be voted upon
unless notice of the proposed amendment was given at least ten (10) days prior
to the meeting at which such objecting shareholder or Director is entitled to
vote. Any amendment, modification, repeal or addition to these Bylaws adopted by
the Board of Directors may be amended or repealed by the shareholders. The Board
is without authority to amend this Article 9.
Bylaws - 9
<PAGE>
[DENTMART GROUP, INC. STOCK CERTIFICATE]
<PAGE>
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