SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended March 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 0-24378
SPPS FINANCIAL CORPORATION
(Exact name of small business issuer in its charter)
DELAWARE 33-0611745
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
1500 Quail Street, Suite 550
Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 660-1500
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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: Common Stock, par
value $.001
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
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. [ X ]
State issuer's revenues for its most recent fiscal year: None
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 31, 1995 was not determinable since the Common
Stock was not traded.
The number of shares outstanding of the issuer's classes of Common
Stock as of March 31, 1995:
Common Stock, $.001 Par Value - 424,600 shares
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
Item 1. DESCRIPTION OF BUSINESS
Background
SPPS Financial Corporation, a Delaware corporation (the "Company") was
incorporated on June 11, 1992. The Company has no operating history other than
organizational matters, and was formed specifically to be a "clean public shell"
and for the purpose of either merging with or acquiring an operating company
with operating history and assets. The Securities and Exchange Commission has
defined and designated these types of companies as "blind pools" and "blank
check" companies.
The primary activity of the Company will involve seeking merger or acquisition
candidates with whom it can either merge or acquire. The Company has not
selected any company for acquisition or merger and does not intend to limit
potential acquisition candidates to any particular field or industry, but does
retain the right to limit acquisition or merger candidates, if it so chooses, to
a particular field or industry. The Company's plans are in the conceptual stage
only.
The executive offices of the Company are located at 1500 Quail Street, Suite
550, Newport Beach, California 92660. Its telephone number is (714) 660-1500.
Plan of Operation - General
The Company was organized for the purpose of creating a corporate vehicle to
seek, investigate and, if such investigation warrants, acquire an interest in
one or more business opportunities presented to it by persons or firms who or
which desire to seek the perceived advantages of a publicly held corporation. At
this time,the Company has no plan, proposal, agreement, understanding or
arrangement to acquire or merge with any specific business or company, and the
Company has not identified any specific business or company for investigation
and evaluation. No member of Management or promotor of the Company has had any
material discussions with any other company with respect to any acquisition of
that company. Although the Company's Common Stock is currently not freely
tradeable, it will eventually become so under exemptions such as Rule 144
promulgated under the Securities Act of 1933. See "Description of Securities."
The Company will not restrict its search to any specific business, industry or
geographical location, and the Company may participate in a business venture of
virtually any kind or nature. The discussion of the proposed business under this
caption and throughout this Registration Statement is purposefully general and
is not meant to be restrictive of the Company's virtually unlimited discretion
to search for and enter into potential business opportunities.
The Company intends to obtain funds in one or more private placements to
finance the operation of any acquired business. Persons purchasing securities in
these placements and other shareholders will likely not have the opportunity to
participate in the decision relating to any acquisition. The Company's proposed
business is sometimes referred to as a "blind pool" because any investors will
entrust their investment monies to the Company's management before they have a
chance to analyze any ultimate use to which their money may be put.
Consequently, the Company's potential success is heavily dependent on the
Company's management, which will have virtually unlimited discretion in
searching for and entering into a business opportunity. None of the officers and
directors of the Company has had any experience in the proposed business of the
Company. There can be no assurance that the Company will be able to raise any
funds in private placements. In any private placement, management may purchase
shares on the same terms as offered in the private placement. (See "Risk
Factors" and "Management").
Management anticipates that it will only participate in one potential business
venture. This lack of diversification should be considered a substantial risk in
investing in the Company because it will not permit the Company to offset
potential losses from one venture against gains from another (see "Risk
Factors").
The Company may seek a business opportunity with a firm which only recently
commenced operations, or a developing company in need of additional funds for
expansion into new products or markets, or seeking to
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develop a new product or service, or an established business which may be
experiencing financial or operating difficulties and is in the need for
additional capital which is perceived to be easier to raise by a public company.
In some instances, a business opportunity may involve the acquisition or merger
with a corporation which does not need substantial additional cash but which
desires to establish a public trading market for its common stock. The Company
may purchase assets and establish wholly owned subsidiaries in various business
or purchase existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in which
to participate will be complex and extremely risky. Because of general economic
conditions, rapid technological advances being made in some industries, and
shortages of available capital, management believes that there are numerous
firms seeking the benefits of a publicly traded corporation. Such perceived
benefits of a publicly traded corporation may include facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for the principals of a business, creating a means for providing
incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes) for all shareholders,
and other factors. 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.
As is customary in the industry, the Company may pay a finder's fee for
locating an acquisition prospect. If any such fee is paid, it will be approved
by the Company's Board of Directors and will be in accordance with the industry
standards. Such fees are customarily between 1% and 5% of the size of the
transaction, based upon a sliding scale of the amount involved. Such fees are
typically in the range of 5% on a $1,000,000 transaction ratably down to 1% in a
$4,000,000 transaction. Management has adopted a policy that such a finder's fee
or real estate brokerage fee could, in certain circumstances, be paid to any
employee, officer, director or 5% shareholder of the Company, if such person
plays a material role in bringing a transaction to the Company.
As part of any transaction, the acquired company may require that Management or
other stockholders of the Company sell all or a portion of their shares to the
acquired company, or to the principals of the acquired company. It is
anticipated that the sales price of such shares will be lower than the current
market price or anticipated market price of the Company's Common Stock. The
Company's funds are not expected to be used for purposes of any stock purchase
from insiders. The Company shareholders will not be provided the opportunity to
approve or consent to such sale. The opportunity to sell all or a portion of
their shares in connection with an acquisition may influence management's
decision to enter into a specific transaction. However, management believes that
since the anticipated sales price will be less than market value, that the
potential of a stock sale by management will be a material factor on their
decision to enter a specific transaction.
The above description of potential sales of management stock is not based upon
any corporate bylaw, shareholder or board resolution, or contract or agreement.
No other payments of cash or property are expected to be received by Management
in connection with any acquisition.
The Company has not formulated any policy regarding the use of consultants or
outside advisors, but does not anticipate that it will use the services of such
persons.
The Company has, and will continue to have, insufficient capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will offer owners of business
opportunities the opportunity to acquire a controlling ownership interest in a
public company at substantially less cost than is required to conduct an initial
public offering. The owners of the business opportunities will, however, incur
significant post-merger or acquisition registration costs in the event they wish
to register a portion of their shares for subsequent sale. The Company will also
incur significant legal and accounting costs in connection with the acquisition
of a business opportunity including the costs of preparing post-effective
amendments, Forms 8-K, agreements and related reports and documents
nevertheless, the officers and directors of the Company have not conducted
market research and are not aware of statistical data which would support the
perceived benefits of a merger or acquisition transaction for the owners of a
business opportunity.
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The Company does not intend to make any loans to any prospective merger or
acquisition candidates or to unaffiliated third parties.
Sources of Opportunities
The Company anticipates that business opportunities for possible acquisition
will be referred by various sources, including its officers and directors,
professional advisers, securities broker-dealers, venture capitalists, members
of the financial community, and others who may present unsolicited proposals.
The Company will seek a potential business opportunity from all known sources,
but will rely principally on personal contacts of its officers and directors as
well as indirect associations between them and other business and professional
people. It is not presently anticipated that the Company will engage
professional firms specializing in business acquisitions or reorganizations.
The officers and directors of the Company are currently employed in other
positions and will devote only a portion of their time (not more than one hour
per week) to the business affairs of the Company, until such time as an
acquisition has been determined to be highly favorable, at which time they
expect to spend full time in investigating and closing any acquisition for a
period of two weeks. In addition, in the face of competing demands for their
time, the officers and directors may grant priority to their full-time positions
rather than to the Company.
Evaluation of Opportunities
The analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company (see "Management").
Management intends to concentrate on identifying prospective business
opportunities which may be brought to its attention through present associations
with management. In analyzing prospective business opportunities, management
will consider such matters as the available technical, financial and managerial
resources; working capital and other financial requirements; history of
operation, if any; prospects for the future; present and expected competition;
the quality and experience of management services which may be available and the
depth of that management; the potential for further research, development or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the potential for
growth or expansion; the potential for profit; the perceived public recognition
or acceptance of products, services or trades; name identification; and other
relevant factors. Officers and directors of each Company will meet personally
with management and key personnel of the firm sponsoring the business
opportunity as part of their investigation. To the extent possible, the Company
intends to utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company for which
audited financial statements cannot be obtained.
It may be anticipated that any opportunity in which the Company participates
will present certain risks. Many of these risks cannot be adequately identified
prior to selection of the specific opportunity, and the Company's shareholders
must, therefore, depend on the ability of management to identify and evaluate
such risk. In the case of some of the opportunities available to the Company, it
may be anticipated that the promoters thereof have been unable to develop a
going concern or that such business is in its development stage in that it has
not generated significant revenues from its principal business activities prior
to the Company's participation. There is a risk, even after the Company's
participation in the activity and the related expenditure of the Company's
funds, that the combined enterprises will still be unable to become a going
concern or advance beyond the development stage. Many of the opportunities may
involve new and untested products, processes, or market strategies which may not
succeed. Such risks will be assumed by the Company and, therefore, its
shareholders.
The Company will not restrict its search for any specific kind of business, but
may acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its corporate life. It is
currently impossible to predict the status of any business in which the Company
may become engaged, in that such business may need additional capital, may
merely desire to have its shares publicly traded, or may seek other perceived
advantages which the Company may offer.
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Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture,
franchise or licensing agreement with another corporation or entity. It may also
purchase stock or assets of an existing business. On the consummation of a
transaction, it is possible that the present management and shareholders of the
Company will not be in control of the Company. In addition, a majority or all of
the Company's officers and directors may, as part of the terms of the
acquisition transaction, resign and be replaced by new officers and directors
without a vote of the Company's shareholders.
It is anticipated that any securities issued in any such reorganization would
be issued in reliance on exemptions from registration under applicable Federal
and state securities laws. In some circumstances, however, as a negotiated
element of this transaction, the Company may agree to register such securities
either at the time the transaction is consummated, under certain conditions, or
at specified time thereafter. The issuance of substantial additional securities
and their potential sale into any trading market which may develop in the
Company's Common Stock may have a depressive effect on such market. While the
actual terms of a transaction to which the Company may be a party cannot be
predicted, it may be expected that the parties to the business transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so called "tax free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code of 1986, as amended (the "Code").
In order to obtain tax free treatment under the Code, it may be necessary for
the owners of the acquired business to own 80% or more of the voting stock of
the surviving entity. In such event, the shareholders of the Company, including
investors in this offering, would retain less than 20% of the issued and
outstanding shares of the surviving entity, which could result in significant
dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of the Company
will meet personally with management and key personnel, may visit and inspect
material facilities, obtain independent analysis or verification of certain
information provided, check reference of management and key personnel, and take
other reasonable investigative measures, to the extent of the Company's limited
financial resources and management expertise.
The manner in which each Company participates in an opportunity will depend on
the nature of the opportunity, the respective needs and desires of the Company
and other parties, the management of the opportunity, and the relative
negotiating strength of the Company and such other management.
With respect to any mergers or acquisitions, negotiations with target company
management will be expected to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
lesser percentage ownership interest in the Company following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilative effect on the percentage of shares held by the Company's
then shareholders, including purchasers in this offering. (See "Risk Factors.")
The Company will not have sufficient funds (unless it is able to raise funds in
a private placement) to undertake any significant development, marketing and
manufacturing of any products which may be acquired. Accordingly, following the
acquisition of any such product, the Company will, in all likelihood, be
required to either seek debt or equity financing or obtain funding from third
parties, in exchange for which the Company would probably be required to give up
a substantial portion of its interest in any acquired product. There is no
assurance that the Company will be able either to obtain additional financing or
interest third parties in providing funding for the further development,
marketing and manufacturing of any products acquired.
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 is made not to participate in a specific business opportunity the costs
therefore incurred in the related investigation would not be recoverable.
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Furthermore, even if an agreement is reached for the participation in a specific
business opportunity, the failure to consummate that transaction may result in
the loss of the Company of the related costs incurred.
Management believes that the Company may be able to benefit from the use of
"leverage" in the acquisition of a business opportunity. Leveraging a
transaction involves the acquisition of a business through incurring significant
indebtedness for a large percentage of the purchase price for that business.
Through a leveraged transaction, the Company would be required to use less of
its available funds for acquiring the business opportunity and, therefore, could
commit those funds to the operations of the business opportunity, to acquisition
of other business opportunities or to other activities. The borrowing involved
in a leveraged transaction will ordinarily be secured by the assets of the
business opportunity to be acquired. If the business opportunity acquired is not
able to generate sufficient revenues to make payments on the debt incurred by
the Company to acquire that business opportunity, the lender would be able to
exercise the remedies provided by law or by contract. These leveraging
techniques, while reducing the amount of funds that the Company must commit to
acquiring a business opportunity, may correspondingly increase the risk of loss
to the Company. No assurance can be given as to the terms or the availability of
financing for any acquisition by the Company. No assurance can be given as to
the terms or the availability of financing for any acquisition by the Company.
During periods when interest rates are relatively high, the benefits of
leveraging are not as great as during periods of lower interest rates because
the investment in the business opportunity held on a leveraged basis will only
be profitable if it generates sufficient revenues to cover the related debt and
other costs of the financing. Lenders from which the Company may obtain funds
for purposes of a leveraged buy-out may impose restrictions on the future
borrowing, distribution, and operating policies of the Company. It is not
possible at this time to predict the restrictions, if any, which lenders may
impose or the impact thereof on the Company.
Competition
The Company is an insignificant participant among firms which engage in
business combinations with, or financing of, development stage enterprises.
There are many established management and financial consulting companies and
venture capital firms which have significantly greater financial and personnel
resources, technical expertise and experience than the Company. In view of the
Company's limited financial resources and management availability, the Company
will continue to be a significant competitive disadvantage vis-a-vis the
Company's competitors.
Regulation and Taxation
The Investment Company Act of 1940 defines an "investment company" as an issuer
which is or holds itself out as being engaged primarily in the business of
investing, reinvesting or trading of securities. While the Company does not
intend to engage in such activities, the Company could become subject to
regulation under the Investment Company Act of 1940 in the event the Company
obtains or continues to hold a minority interest in a number of development
stage enterprises. The Company could be expected to incur significant
registration and compliance costs if required to register under the Investment
Company Act of 1940. Accordingly, management will continue to review the
Company's activities from time to time with a view toward reducing the
likelihood the Company could be classified as an "investment company."
The Company intend to structure a merger or acquisition in such manner as to
minimize Federal and state tax consequences to the Company and to any target
company.
Employees
The Company's only employees at the present time are its officers and
directors, who will devote as much time as the Board of Directors determine is
necessary to carry out the affairs of the Company. (See "Management").
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Item 2. DESCRIPTION OF PROPERTY
The Company rents an executive suite on an as needed basis. The Company pays
its own charges for long distance telephone calls and other miscellaneous
secretarial, photocopying and similar expenses.
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1995.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has not traded. As of March 31, 1995, there
were 110 stockholders of record.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Company has been recently formed and has not engaged in any
operations other than organizational matters.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company required to be
included in Item 7 are set forth in the Financial Statements Index.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
The members of the Board of Directors of the Company serve until the
next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
Information as to the directors and executive officers of the Company is as
follows.
Eric W. Anderson has been a director, chairman and chief financial
officer since inception of the Company. He founded Bentley Richards &
Associates, Inc. in July 1991. Bentley, Richards provides financial public
relations services to public and private companies. He is also chief executive
officer and director of Faraday Financial, Inc., which provides financial and
consulting services. From January 1987 to June 1991 Mr. Anderson was a
registered representative at various NASD broker-dealers, including Cruttenden &
Company (October 1990 to June 1991), Grant Bettingen, Inc. (May to October
1990), Ross Anderson Capital Management (July 1989 to May 1990), Sacks
Investments (August 1987 to May 1990) and Private Ledger, Inc. (January August
1987. Mr. Anderson was also a principal of Ross Anderson Capital Management. Mr.
Anderson received an MBA from Sonoma State University in 1987.
Jehu Hand has been President and Secretary of the Company since its
inception. Mr. Hand has been engaged in corporate and securities law practice
and has been a partner of the law firm of Hand & Hand since 1992. From January
1992 to December 1992 he was the Vice President-Corporate Counsel and Secretary
of Laser Medical Technology, Inc., which designs, manufactures and markets
dental lasers and endodontics equipment. He was a director of Laser Medical from
February 1992 to February 1993. Mr. Hand is a director of Interactive Medical
Technologies Ltd., which manufactures and sells diagnostic imaging spheres to
measure blood flow, of Faraday Financial, Inc., and Monarch Pictures
Corporation. From January to October, 1992 Mr. Hand was Of Counsel to the Law
Firm of Lewis, D'Amato, Brisbois & Bisgaard. From January 1991 to January 1992
he was a shareholder of McKittrick, Jackson, DeMarco & Peckenpaugh, a law
corporation. From January to December 1990 he was a partner of Day, Campbell &
Hand, and was an associate of its predecessor law firm from July 1986 to
December 1989. From 1984 to June 1986 Mr. Hand was an associate attorney with
Schwartz, Kelm, Warren & Rubenstein in Columbus, Ohio. Jehu Hand received a J.D.
from New York University School of Law and a B.A. from Brigham Young University.
Conflicts of Interest
Certain conflicts of interest now exist and will continue to exist
between the Company and its officers and directors due to the fact that each has
other business interests to which he devotes his primary attention. Each officer
and director may continue to do so notwithstanding the fact that management time
should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its
management, and conflicts may develop in the future. The officers and directors
of the Company may hold similar positions with other blank check companies.
The Company has not established policies or procedures for the
resolution of current or potential conflicts of interests between the Company,
its officers and directors or affiliated entities. There can be no assurance
that management will resolve all conflicts of interest in favor of the Company,
and failure by management to conduct the Company's business in the Company's
best interest may result in liability to the management. The officers and
directors are accountable to the Company as fiduciaries, which means that they
are required to exercise good faith and integrity in handling the Company's
affairs. Shareholders who believe that the Company has been harmed by failure of
an officer or director to appropriately resolve any conflict of interest may,
subject to applicable rules of civil procedure, be able to bring a class action
or derivative suit to enforce their rights and the Company's rights.
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The Company has no arrangement, understanding or intention to enter
into any transaction for participating in any business opportunity with any
officer, director, or principal shareholder or with any firm or business
organization with which such persons are affiliated, whether by reason of stock
ownership, position as an officer or director, or otherwise.
The Company, by resolution of its Board of Directors and
stockholders, adopted a 1992 Stock Option Plan (the "Plan") on June 11, 1992.
The Plan enables the Company to offer an incentive based compensation system to
employees, officers and directors and to employees of companies who do business
with the Company.
In the discretion of a committee comprised of non-employee directors
(the "Committee"), directors, officers, and key employees of the Company and its
subsidiaries or employees of companies with which the Company does business
become participants in the Plan upon receiving grants in the form of stock
options or restricted stock. A total of 2,000,000 shares are authorized for
issuance under the Plan, of which 40,000 shares are issuable under options
granted to officers and directors at $.50 per share, exercisable until May 4,
1997. The Company does not intend to grant additional options until such time as
a merger or acquisition has been consummated. The Company may increase the
number of shares authorized for issuance under the Plan or may make other
material modifications to the Plan without shareholder approval. However, no
amendment may change the existing rights of any option holder.
Any shares which are subject to an award but are not used because
the terms and conditions of the award are not met, or any shares which are used
by participants to pay all or part of the purchase price of any option may again
be used for awards under the Plan. However, shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.
Stock options may be granted as non-qualified stock options or
incentive stock options, but incentive stock options may not be granted at a
price less than 100% of the fair market value of the stock as of the date of
grant (110% as to any 10% shareholder at the time of grant); non-qualified stock
options may not be granted at a price less than 85% of fair market value of the
stock as of the date of grant. Restricted stock may not be granted under the
Plan in connection with incentive stock options.
Stock options may be exercised during a period of time fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability, whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock acquired through the exercise of a stock option may be made in cash,
shares of the Company's Common Stock or by delivery or recourse promissory notes
or a combination of notes, cash and shares of the Company's common stock or a
combination thereof. Incentive stock options may only be issued to directors,
officers and employees of the Company.
Stock options may be granted under the Plan may include the right to
acquire an Accelerated Ownership Non-Qualified Stock Option ("AO"). If an option
grant contains the AO feature and if a participant pays all or part of the
purchase price of the option with shares of the Company's common stock, then
upon exercise of the option the participant is granted an AO to purchase, at the
fair market value as of the date of the AO grant, the number of shares of common
stock the Company equal to the sum of the number of whole shares used by the
participant in payment of the purchase price and the number of whole shares, if
any, withheld by the Company as payment for withholding taxes. An AO may be
exercised between the date of grant and the date of expiration, which will be
the same as the date of expiration of the option to which the AO is related.
Stock appreciation rights and/or restricted stock may be granted in
conjunction with, or may be unrelated to stock options. A stock appreciation
right entitles a participant to receive a payment, in cash or common stock or a
combination thereof, in an amount equal to the excess of the fair market value
of the stock at the time of exercise over the fair market value as of the date
of grant. Stock appreciation rights may be exercised during a period of time
fixed by the Committee not to exceed ten years after the date of grant or three
years after death or disability, whichever is later. Restricted stock requires
the recipient to continue in service as an officer, director, employee or
consultant for a fixed period of time for ownership of the shares to vest. If
restricted shares or stock appreciation
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rights are issued in tandem with options, the restricted stock or stock
appreciation right is canceled upon exercise of the option and the option will
likewise terminate upon vesting of the restricted shares.
Item 10. EXECUTIVE COMPENSATION
No compensation is paid or anticipated to be paid by the Company
until an acquisition is made.
On acquisition of a business opportunity, current management may
resign and be replaced by persons associated with the business opportunity
acquired, particularly if the Company participates in a business opportunity by
effecting a reorganization, merger or consolidation. If any member of current
management remains after effecting a business opportunity acquisition, that
member's time commitment will likely be adjusted based on the nature and method
of the acquisition and location of the business which cannot be predicted.
Compensation of management will be determined by the new board of directors, and
shareholders of the Company will not have the opportunity to vote on or approve
such compensation.
Directors currently receive no compensation for their duties as
directors.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information relating to the beneficial
ownership of Company common stock by those persons beneficially holding more
than 5% of the Company capital stock, by the Company's directors and executive
officers, and by all of the Company's directors and executive officers as a
group.
<TABLE>
<CAPTION>
Percentage
Name of Number of of Outstanding
Stockholder Shares Owned Common Stock
<S> <C> <C>
Eric Anderson (1)(2) 200,000 45.0%
Jehu Hand (1)(2) 110,000 24.7%
Elizabeth Rodelli 90,000 21.2%
2249 Via Salvador
San Clemente, CA 92672
All officers and
directors as a group
(2 persons) (1) 310,000 66.7%
</TABLE>
(1) Includes 20,000 shares issuable upon exercise of stock options held by
each of Messrs. Hand and Anderson.
(2) The address of such person is care of the Company.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with organizing the Company, persons consisting of its
officers, directors, and other individuals paid an aggregate of $500 in cash to
purchase a total of 400,000 shares of Common Stock at an average sales price of
$.00125 per share. In April 1993 Messrs. Hand and Anderson also contributed
$500.00 to the Company as a contribution to capital. Under Rule 405 promulgated
under the Securities Act of 1933, Messrs. Hand and Anderson may be deemed to be
promoters of the Company. No other persons are known to Management which would
be deemed to be promoters.
An officer of the Company has advanced certain expenses on behalf of
the Company, totallying $947 and $168 as of March 31, 1995 and 1994,
respectively. On April 1, 1995 the Corporation gave to the officer a promissory
note for $947, convertible into 242,066 shares of common stock on demand.
11
<PAGE>
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits of the Company are included
herein.
Exhibit No. Document Description
3. Certificate of Incorporation and Bylaws
3.1. Articles of Incorporation(1)
3.2 Bylaws(1)
10. Material Contracts
10.1. 1992 Stock Option Plan(1)
10.2 Stock Option Agreement with Jehu Hand(1)
10.3 Stock Option Agreement with Eric Anderson(1)
10.4 Stock Option Agreement with Jehu Hand(2)
10.5 Convertible Promissory Note(2)
(1) Incorporated by reference to such exhibit as filed with the Company's
registration statement on Form 10-SB, File No. 0-24378.
(2) Filed herewith.
(b) Reports on Form 8-K.
Not Applicable.
12
<PAGE>
Board of Directors of
SPPS Financial Corporation
INDEPENDENT AUDITOR'S REPORT
I have audited the statement of financial position of SPPS Financial Corporation
( a development stage company) as of March 31, 1994 and 1993, and the related
statements of operations, changes in stockholders' equity and cash flows for the
year ended March 31, 1994 and from inception (June 11, 1992) through March 31,
1993.
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
misstatements. 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 position of SPPS Financial corporation (a
development stage company) as of March 31, 1994 and 1993, and the results of its
operations, changes in stockholders' equity and cash flows for the year ended
March 31, 1994 and from inception (June 11, 1992) through March 31, 1993, in
conformity with generally accepted accounting principles.
Terrence J. Dunne
Certified Public Accountant
Spokane, Washington
May 26, 1994
13
<PAGE>
<TABLE>
<CAPTION>
SPPS FINANCIAL CORPORATION
(A Development Stage Company) Statements of Financial Position
ASSETS
March 31, March 31,
1995 1994
(Unaudited)
<S> <C> <C>
CURRENT ASSETS - CASH $ 0 $ 763
OTHER ASSETS
Organization costs, net of accumulated
amortization of $102 and $156 (Note 1) 107 161
TOTAL ASSETS $ 107 $ 924
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES - Accounts payable $ 947 $ 168
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 par value; 1,000,000 shares
authorized; no shares issued and outstanding
Common Stock, $.001 par value; 20,000,000 shares
authorized; 424,600 shares issued and outstanding 425 425
Additional paid-in Capital 821 821
Accumulated deficit during the development stage (2,086) (490)
TOTAL STOCKHOLDERS' EQUITY (840) 756
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 107 $ 924
The accompanying notes are an integral part of the
financial statements.
14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPPS FINANCIAL CORPORATION
(A Development Stage Company) Statements of Operations
CUMULATIVE
FOR THE FOR THE FROM INCEPTION
YEAR ENDED YEAR ENDED (June 11, 1992)
TO
March 31, 1995 March 31, 1994 March 31, 1995
<S> <C> <C> <C>
REVENUES $ -0- $ -0- $ -0-
OPERATING EXPENSES
General and Administrative 1,542 168 1,930
Amortization 54 53 156
TOTAL OPERATING EXPENSES 1,596 221 2,086
NET (LOSS) $ (1,596) $ (221) $ (2,086)
NET (LOSS) PER SHARE $ (Nil) $ (Nil) $ (Nil)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 424,600 412,300 414,453
The accompanying notes are an integral part of the
financial statements.
15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPPS FINANCIAL CORPORATION Statement of Changes in Stockholders'
(A Development Stage Company) Equity From Inception (June 11, 1992)
Through March 31, 1995
Accumulated
Deficit
Common Stock Additional During the
Paid-In Development
Shares Amount Capital Stage Total
Issuance of common stock
<S> <C> <C> <C> <C> <C>
for cash 400,000 $ 400 $ 100 $ $ 500
Net (loss) (269) (269)
Balances at
March 31, 1993 400,000 400 100 (269) 231
Net (loss) (221) (221)
Contribution to capital 500 500
Sale of shares in private placement 24,600 25 221 246
on September 30, 1993
Balances at
March 31, 1994 424,600 $ 425 $ 821 $ (490) $ 756
Net (loss) (Unaudited) (1,596) (1,596)
Balances at
March 31, 1995 424,600 $ 425 $ 821 $ (2,086) $ (840)
The accompanying notes are an integral part of these
financial statements.
16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPPS FINANCIAL CORPORATION
(A Development Stage Company) Statements of Cash Flows
CUMULATIVE
FOR THE FOR THE FROM INCEPTION
YEAR YEAR June 11, 1992
ENDED ENDED TO
March 31, 1995 March 31, 1994 March 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (Loss) $ (1,596) $ (221) $ (2,086)
Add item not requiring the use of cash 54 53 156
Increase (decrease) in accounts payable 779 (52) 947
Net cash flows from operating activities (763) (220) (983)
CASH FLOWS FROM INVESTING ACTIVITIES
Organization Costs (263)
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution to Capital 500 500
Sale of common stock 246 746
Net Cash flows from financing activities 746 1,246
NET INCREASE IN CASH (763) 526 (763)
CASH BALANCE AT BEGINNING OF PERIOD 763 237 763
CASH BALANCE AT END OF PERIOD $ $ 763 $ -0-
The accompanying notes are an integral part of the
financial statements.
17
</TABLE>
<PAGE>
SPPS FINANCIAL CORPORATION
(A Development Stage Company) Notes to Financial Statements
NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated under the laws of the State of Delaware
on June 11, 1992, for the purpose of seeking out business
opportunities, including acquisitions. The Company is in the
development stage and will be very dependent on the skills, talents,
and abilities of management to successfully implement its business
plan. Due to the Company's lack of capital, it is likely that the
Company will not be able to compete with larger and more experienced
entities for business opportunities which are lower risk and are
more attractive for such entities. Business opportunities in which
the Company may participate will likely be highly risky and
speculative. Since inception, the Company's activities have been
limited to organizational matters. Organizational costs are
amortized on a straight-line basis over five years.
The financial statements as of and for the year ended March 31, 1995
are unaudited, pursuant to the exemption provided by Rule 3-11 of
Regulation S-X.
NOTE 2 CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
NOTE 3 RELATED PARTY TRANSACTIONS
The Company currently receives the use of office space free of
charge from Jehu Hand, president of the Company. The fair market
value of the office space in the same geographic region is $20 per
month.
The officers and directors of the Company currently serve without
compensation.
NOTE 4 INCOME TAXES
The fiscal year end of the Company is March 31st and an income tax
return has not been filed. However, if an income tax return had been
filed, the Company would have a net operating loss carryforward of
$2,086 that would begin expiring in the year 2009.
NOTE 5 STOCK OPTION PLAN
The Company has stock option plans for directors, officers,
employees, advisors, and employees of companies that do business
with the Company, which provide for non-qualified and qualified
stock options. The Stock Option Committee of the Board determines
the option price which cannot be less than the fair market value at
the date of the grant of 110% of the fair market value if the
Optionee holds 10% or more of the Company's common stock. The price
per share of share subject to a Non-Qualified Option shall not be
less than 85% of the fair market value at the date of the grant.
Options generally expire either three months after termination of
employment, or ten years after date of grant (five years if the
optionee holds 10% or more of the Company's common stock at the time
of grant).
18
<PAGE>
SPPS FINANCIAL CORPORATION
(A Development Stage Company) Notes to Financial Statements
Options outstanding:
Shares allocated 2,000,000
Option price $ .50
Balance at inception --
Granted 40,000
Balance outstanding at
March 31, 1993 40,000
Granted --
Balance outstanding at
March 31, 1994 40,000
Granted 20,000
Lapsed 20,000
Balance Outstanding at
March 31, 1995 40,000
Year exercisable:
1997 40,000
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 on January 31, 1996.
SPPS FINANCIAL CORPORATION
By: /s/ Jehu Hand
Jehu Hand
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities on January 31, 1996.
By: /s/ Jehu Hand President, Secretary and Director
Jehu Hand (Principal Executive, Accounting and Financial Officer)
20
1992 STOCK OPTION PLAN OF SPPS FINANCIAL CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made by and between
SPPS FINANCIAL CORPORATION, a Delaware corporation (the "Company"), and
Jehu Hand (the "Optionee") as of the date set forth on the signature page
hereto.
R E C I T A L S
A. The Board of Directors of the Company (the "Board") has established
the 1992 Stock Option Plan of the Company (the "Plan"), for the purpose of
providing to Employees and Directors of the Company and others an opportunity to
acquire shares of the Company's $.001 par value common stock (the "Shares"); and
B. The Board of Directors or the Stock Option Committee of the
Company's Board of Directors (the "Committee") appointed to administer the Plan
has determined that it would be to the advantage and best interest of the
Company and its shareholders to grant the non-qualified stock option, Incentive
stock option or restricted stock grant provided for herein (the "Option") to the
Optionee as an inducement to remain in the service of the Company and as an
Incentive for Increased efforts during such service, and has advised the Company
thereof and instructed it to issue the Option.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified below unless the context clearly indicates to the
contrary. Capitalized terms used herein and not otherwise defined shall have the
meaning set forth in the Plan. The masculine pronoun shall Include the feminine
and neuter, and the singular the plural, where the context so indicates.
Section 1.1 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.2 - Company
"Company" shall mean SPPS Financial Corporation. In addition,
"Company" shall mean any corporation assuming, or issuing new employee stock
options in substitution for the Option and Incentive Stock Options (as defined
in Section 1.7 of the Plan), outstanding under the Plan, in a transaction to
which Section 425(a) of the Code applies.
Section 1.3 - Option
"Option" shall mean the option to purchase $.001 par value common stock
of the Company granted under this Agreement.
<PAGE>
Section 1.4 - Plan
"Plan" shall mean the 1992 Stock Option Plan of the Company.
Section 1.5 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.6 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
In consideration of the Optionee's agreement to render faithful and
efficient services to the Company and for other good and valuable consideration,
on the date set forth on the Signature Page hereof (the "Date of Grant"), the
Company irrevocably grants to the Optionee the option to purchase any part or
all of an aggregate of the number of Shares set forth on the Signature Page
hereof and upon the terms and conditions set forth in this Agreement.
Section 2.2 - Purchase Price
The purchase price of the Shares covered by the Option shall be the
amount set forth on the Signature Page hereof and shall be without commission or
other charge (the "Purchase Price").
Section 2.3 - Reservation of Rights
Nothing in the Plan or in this or any Stock Option Agreement shall
confer upon the Optionee any right to continue in the employ of the Company or
any Subsidiary or shall interfere with or restrict in any way the rights of the
Company and its Subsidiaries, which are hereby expressly reserved, to discharge
the Optionee at any time for any reason whatsoever, with or without cause.
Section 2.4 - Adjustments in Option
In the event that the outstanding Shares subject to the Option are
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split up, stock dividend, or
combination of shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which the Option, or portions
thereof then unexercised, shall be exercisable, to the end that after such event
the Optionee's proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option shall be made without
change in the total price applicable to the unexercised portion of the Option
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices) and with any necessary corresponding adjustment in
the Purchase Price. Any such adjustment made by the Committee shall be final and
binding upon the Optionee, the Company, the Subsidiaries and all other
interested persons.
2
<PAGE>
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) The Option shall become exercisable in cumulative installments
as set forth on the signature page
hereto.
(b) Excluding Saturdays, Sundays, and nationally recognized holidays,
if the Optionee is absent from employment for any reason other than vacation for
an aggregate period exceeding sixty (60) days during the annual period between
the Date of Grant and the First Anniversary Date or any successive Anniversary
Date and the following Anniversary Date, then the latter Anniversary Date shall
be postponed by the number of all such days of absence. This paragraph (b) shall
not apply to Optionees who are Directors but not Employees of the Company.
Section 3.2 - Duration of Exercisability
The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until the expiration date set forth on the signature page of this
Agreement or until it becomes unexercisable under the Plan, whichever is sooner.
Section 3.3 - Assumption of Option; Acceleration of Exercisability
In the event of the merger or consolidation of the Company with or into
another corporation, or the acquisition by another corporation or person of all
or substantially all of the Company's assets or eighty percent (80%) or more of
the Company's then outstanding voting stock, or the liquidation or dissolution
of the Company, such Option shall be assumed or an equivalent option substituted
by any successor corporation of the Company. The Company undertakes to make
reasonable and adequate provision for such assumption or substitution of the
Option upon or in connection with such merger, consolidation, acquisition,
liquidation, or dissolution. The Committee may also, in its absolute discretion
and upon such terms and conditions as it deems appropriate, by resolution
adopted prior to such event, provide that at some time prior to the effective
date of such event this Option shall be exercisable as to all of the Shares
covered hereby, notwithstanding that this Option may not yet have become fully
exercisable under Section 3.1.
Section 3.4 - Option Not Transferable
Neither the Option nor any interest or right therein or part thereof
shall be liable for the debts, contracts, or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment, or any other means
whether such disposition be voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (Including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 3.5
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
3
<PAGE>
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he or she may exercise the
Option or any portion thereof. After the death of the Optionee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable, be exercised by his or her personal representative or by any
person empowered to do so under the Optionee's will or under the then applicable
laws of descent and distribution.
Section 4.2 - Partial Exercise
Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under the
Plan; provided, however, that each partial exercise shall be for not less than
one hundred (100) Shares (or minimum installment set forth in Section 3.1, if a
smaller number of Shares) and shall be for whole Shares only.
Section 4.3 - Manner of Exercise
The Option, or any exercisable portion thereof, may be exercised solely
by delivery to the Secretary or the Secretary's office of all of the following
prior to the time when the Option or such portion becomes unexercisable under
the Plan:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion thereof, stating that the Option or
portion thereof is thereby exercised, such notice complying with all applicable
rules established by the Committee; and
(b) (i) Full payment (in cash or by check) for the Shares with respect
to which such Option or portion
is exercised; or
(ii) Shares of any class of the Company's stock owned by the
Optionee duly endorsed for transfer to the Company with a fair market
value on the date of delivery equal to the aggregate Option price of
the Shares with respect to which such Option or portion is thereby
exercised; or
(iii) With the consent of the Committee, a full recourse promissory
note bearing interest (at least such rate as shall then preclude the
imputation of interest under the Code or any successor provision) and
payable upon such terms as may be prescribed by the Committee. The
Committee may also prescribe the form of such note and the security to
be given for such note. No Option may, however, be exercised by
delivery of a promissory note or by a loan from the Company when or
where such loan or other extension of credit is prohibited by law; or
(iv) Any combination of the consideration provided in the foregoing
subsections (i), (ii), and (iii); and
(c) Full payment to the Company of all amounts which, under
federal, state or local law, it is required
to withhold upon exercise of the Option; and
(d) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the Option.
4
<PAGE>
Section 4.4 - Conditions to Issuance of Stock Certificates
The Shares deliverable upon the exercise of the Option, or any portion
thereof, may be either previously authorized but unissued Shares or issued
Shares which have then been reacquired by the Company. Such Shares shall be
fully paid and non-assessable. The Company shall not be required to issue or
deliver any certificate or certificates for Shares purchased upon the exercise
of the Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The completion of any registration or other qualification of such
Shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Committee shall, in its absolute discretion, deem necessary or
advisable;
(b) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(c) The payment to the Company of all amounts which, under
federal, state, or local law, it is required
to withhold upon exercise of the Option; and
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may from time to time establish for reasons of
administrative convenience.
It is understood that the Shares deliverable upon exercise of the Option have
been registered under the Securities Act, and the Company shall use its best
efforts to keep such registration current.
Section 4.5 - Rights as Stockholder
The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any Shares purchasable
upon the exercise of any part of the Option unless and until certificates
representing such Shares shall have been issued by the Company to such holder.
ARTICLE V
OTHER PROVISIONS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee or the Special Committee in good faith shall be final and
binding upon the Optionee, the Company, the Subsidiaries and all other
interested persons. No member of the Committee or the Special Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Option. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and
duties of the Committee under the Plan and this Agreement.
Section 5.2 - Shares to Be Reserved
The Company shall at all times during the term of the Option reserve
and keep available such number of Shares as will be sufficient to satisfy the
requirements of this Agreement.
5
<PAGE>
Section 5.3 - Notices
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Optionee shall be addressed to him or her at the address set forth
on the Signature Page hereof. By a notice given pursuant to this Section 5.3,
either party may hereafter designate a different address for delivery of
notices. Any notice which is required to be given to the Optionee shall, if the
Optionee is then deceased, be given to the Optionee's personal representative if
such representative has previously informed the Company of his status and
address by written notice under this Section 5.3. Any notice shall be deemed
duly given when enclosed in a properly sealed envelope or wrapper addressed as
aforesaid and deposited (with postage prepaid) in a post office or branch post
office regularly maintained by the United States Postal Service.
Section 5.4 - Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.
Section 5.5 - Construction
This Agreement shall be administered, interpreted, and enforced under
the laws of the State of Delaware.
6
<PAGE>
SIGNATURE PAGE
1992 STOCK OPTION PLAN OF SPPS FINANCIAL CORPORATION
Incentive Stock Option
In tandem with stock appreciation right
No stock appreciation right
X Non-Qualified Option
X AO Option
In tandem with stock appreciation right No stock
appreciation right In tandem with Restricted Stock
X No Restricted Stock
Restricted stock grant without accompanying option
Purchase Price: $.01
Number of Shares: 20,000
Vesting: Immediate as to the entire option.
Expiration: June 11, 1997
I have read the Stock Option Agreement indicated above which was
adopted for use in connection with the 1992 Stock Option Plan. As Optionee, I
hereby agree to all of the terms of the Agreement.
Date of Grant: March 31, 1995 Jehu Hand
----------
Optionee Name
Address
Optionee Social Security Number or Taxpayer Identification
Number:
Optionee Signature
The Company hereby agrees to all of the terms of the Agreement.
SPPS FINANCIAL CORPORATION
By:
Its:
7
<PAGE>
CONVERTIBLE PROMISSORY NOTE
$947 April 1, 1995
FOR VALUE RECEIVED, the undersigned SPPS Financial Corporation, a
Delaware corporation ("Maker") promises to pay to the order of Jehu Hand
("Lender"), at its principal office, or at such other place as may be designated
in writing by the holders of this Promissory Note ("Note"), the principal sum of
NINE HUNDRED FORTY SEVEN AND 00/100 DOLLARS ($947.00) (the "Principal Sum"). The
unpaid Principal Sum shall bear interest from the date hereof until paid at a
rate equal 4% per annum.
The unpaid Principal Sum and all accrued but unpaid interest thereon
shall all be due and payable on demand.
All payments to be made under this Note shall be payable in lawful
money of the United States of America which shall be legal tender for public and
private debts at the time of payment.
In the event that an action is instituted to collect this Note, or any
portion thereof, Maker promises to pay all costs of collection, including but
not limited to reasonable attorneys' fees, court costs, and such other sums as
the court may establish.
In the event of a default under this Note when due, then the holder of
this Note, at its election, may declare the entire unpaid Principal Sum and all
accrued but unpaid interest thereon immediately due and payable.
Lender shall have the right at any time to convert the Principal Sum
and all accrued and unpaid interest thereon into 242,066 shares of common stock
of the Maker ("Shares").
Every provision hereof is intended to be several. If any provision of
this Note is determined, by a court of competent jurisdiction to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
not affect the other provisions hereof, which shall remain binding and
enforceable.
This Note is made in the State of California and it is mutually agreed
that California law shall apply to the interpretation of the terms and
conditions of this Note.
All agreements between the holder of this Note and Maker are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of deferment or acceleration of the maturity of this Note or otherwise,
shall the rate of interest hereunder exceed the maximum permissible under
applicable law with respect to the holder. If, from any circumstances
whatsoever, the rate of interest resulting from the payment and/or accrual of
any
<PAGE>
amount of interest hereunder, at any time that payment of interest is due and/or
at any time that interest is accrued, shall exceed the limits prescribed by such
applicable law, then the payment and/or accrual of such interest shall be
reduced to that resulting from the maximum rate of interest permissible under
such applicable law. This provision shall never be superseded or waived.
The makers, endorsers, and/or guarantors of this Note do hereby
severally waive presentment, demand, protest and notices of protest, demand,
dishonor and nonpayment.
IN WITNESS WHEREOF, this instrument is executed as of the date first
hereinabove set forth.
SPPS FINANCIAL CORPORATION
By:
Name:
Its:
<PAGE>
