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DESCRIPTION OF SECURITIES
Shares Outstanding:
Before the Offering Total Shares
22,996,972 Shares
After the Offering Total Shares
27,996,972 Shares (1)
(1) This total is based on the holder of the Convertible Debenture converting
a sum of the principal amount of the debenture into 5,000,000 Shares, which
is the maximum number of shares that can be offered pursuant to this SB-2
Registration Statement at a price of $___ per Share. The Shares outstanding
after the Offering will vary depending on the amount of principal converted
into Shares of our Common Stock under the Convertible Debenture Agreement.
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 100,000,000 Shares of Common Stock,
$.001 par value per share and 5,000,000 shares of Preferred. The holders of
Common Stock (i) have equal ratable rights to dividends from funds legally
available therefore, when, as and if declared by our Board of Directors; (ii)
are entitled to share ratably in all of our assets available for distribution
or winding up of our affairs; (iii) do not have preemptive subscription or
conversion rights and there are no redemption or sinking fund applicable
thereto; and (iv) are entitled to one non-cumulative vote per share, on all
matters which shareholders may vote on at all meetings of shareholders. As of
the date of this prospectus, we had 22,996,972 Shares of Common Stock
outstanding.
Non-Cumulative Voting
The holders of our Shares of Common Stock of the do not have cumulative voting
rights which means that the holders of more than 50% of such outstanding Shares,
voting for the election of directors, can elect all of the directors to be
elected, if they so choose, and, in such event, the holders of the remaining
Shares will not be able to elect any of our directors.
Dividends
We do not currently intend to pay cash dividends. Our proposed dividend
policy is to make distributions of its revenues to its stockholders when our
Board of Directors deems such distributions appropriate. Because we do not
intend to make cash distributions during the first fiscal year, potential
shareholders would need to sell their shares to realize a return on their
investment. Because we are a start up company, there can be no assurances of
the projected values of their shares, nor can there be any guarantees of our
success.
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A Distribution of revenues will be made only when, in the judgment of our
Board of Directors, it is in our best interests and the interests of the
stockholders to do so. The Board of Directors will review, among other
things, the investment quality and marketability of the securities considered
for distribution; the impact of a distribution of the investee's securities
on its customers, joint venture associates, management contracts, other
investors, financial institutions and the companies internal management; tax
consequences and the market effects of an initial or broader distribution of
such securities.
PREFERRED SHARES
We have authorized 5,000,000 Shares of Class A Convertible Preferred Stock of
which 1,000,000 are issued and outstanding with a par value of $.01 per
share. The Preferred Shares will carry twenty-to-one voting preference over
the Common Stock subject to ratification by a majority of shareholders.
Majority shareholder ratification will be forthcoming.
The shares of Preferred Stock shall have priority over all Common Stock as to
both the payment of dividends and the distribution of all assets upon any
liquidation, dissolution or winding up of our operations and is not entitled to
preemptive rights.
In the event we are faced with liquidation, dissolution or winding up (which
does not include any situation where we consolidate or merge with or into any
other corporation), holders of the Class A Convertible Preferred Stock are
entitled to receive $.10 in cash per share plus accumulated and unpaid
dividends out of the assets available for distribution to holders of Common
Stock or other junior ranking stock. If the amounts payable for the Class A
Preferred Stock are not paid in full, the holders of the Class A Preferred
Stock will share ratably in any distribution of assets in proportion to the
full preferential amounts to which the shares are entitled.
We may redeem Class A Preferred Stock by giving 30 days' written notice, for
$.50 per share. Preferred Stock shareholders will have the right to convert
their Preferred Stock into Common Stock during this 30 day period.
Class A Preferred Stock shareholders also have the right to convert their
Preferred Stock into Common Stock at a conversion rate of one (1) share of
Preferred Stock for one (1) share of Common Stock. Any redeemed or converted
shares will be restored to the status of authorized but unissued shares of
Preferred Stock without designation as to class, and may be issued by us, but
not as shares of Class A Preferred Stock
The Preferred Stock and the Common Stock issued due to a conversion from
Preferred Stock, which bear a restrictive legend, generally may be sold in the
public market, without registration, under the following conditions (i) the
shares have been beneficially owned for at least one year; (ii) a person who is
deemed to be an "affiliate" of ours may sell, in any three (3) month period, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly trading volume in the
over-the-counter market during the four calendar weeks preceding such sale; or
(iii) a person deemed to be a "non-affiliate" who has held the shares for at
least two (2) years may sell their shares without regard to any volume
limitation.
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1999 STOCK OPTION PLAN
The purpose of our 1999 Stock Incentive Plan is to provide designated officers,
employees and non-employee directors with equity-based compensation incentives.
The Plan is administered by a Committee of "disinterested persons" (the
"Committee"). The Plan allows directors, employees and non-employees an option
to purchase Common Stock ("Stock Options") or receive Common Stock subject to
certain restrictions ("Awards"). The maximum number of shares of Common Stock to
be issued by the Plan is 2,750,000. There may be no Stock Options or Awards
granted after December 31, 2008.
Provisions Relating to Stock Options
The purchase price (the "Exercise Price") of shares of Common Stock subject
to each Stock Option ("Option Shares") shall equal the fair market value of
such shares on the date of the grant of the Stock Option unless the Employee
possesses more than 10% of the total combined voting power of all classes of
our stock. In that case, the purchase price shall equal at least 110% of the
fair market value. The Stock Option period (the "Term") shall start on the
date of the grant of the Stock Option and shall be ten (10) years, unless a
shorter period is determined by the Committee. If however, the Employee
possesses more than 10% of the total combined voting power of all classes of
our stock, then the Stock Option period shall not exceed five (5) years.
The Stock Option shall be exercisable only by an employee who remains in our
employ. The Stock Option is exercisable for a period of ninety (90) days after
employment is terminated unless the termination is due to the Employee's
retirement, disability or death (if the Employee dies during the ninety (90)
days, the Term is extended for a period of twelve (12) months). If employment is
terminated due to retirement, disability or death, the Stock Option is
exercisable for the full Term.
Each member of the Board of Director who is not an Employee (a "Non-Employee
Director") shall automatically be granted a Stock Option to purchase 5,000
shares of Common Stock on each anniversary of such person's continuous
service on the Board with a Term of ten (10) years starting on the date of
the grant. If the Non-Employee Director is terminated due to fraud,
embezzlement, misappropriation or conversion of assets or corporate
opportunities, the unexercised Stock Options shall terminate on the date of
the termination of the directorship. The Committee does not have the
authority to grant Non-Employee Directors Awards, nor does the Committee have
any discretion in granting Non-Employee Directors Options.
Provision Relating to Awards
Each Award under our Plan shall consist of a grant of shares of Common Stock
subject to a restriction period which begins on the date the Award is granted
and ends on a date determined by the Committee ("Restriction Period").
If an Employee's employment ends during the Restriction Period, the Award
shares are immediately forfeited by the Employee and reacquired by the
Company.
TRANSFER AGENT
We have hired Alpha Tech Stock Transfer, 4505 S. Wasatch Blvd., Suite 205, Salt
Lake City, Utah 84121 to act as Transfer Agent and Registrar.
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INTEREST OF NAMED EXPERTS AND COUNSEL
No named expert or counsel was hired on a contingent basis, will receive a
direct or indirect interest in the Company, or was a promoter, underwriter,
voting trustee, director, officer, or employee of the Company.
DISCLOSURE OF SECURITIES AND EXCHANGE COMMISSION POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
None of our directors will have personal liability to us or any of our
stockholders for monetary damages for breach of fiduciary duty as a director
involving any act or omission of any such director since provisions have been
made in the Articles of Incorporation limiting such liability. The foregoing
provisions shall not eliminate or limit the liability of a director (i) for
any breach of the directors duty of loyalty to us or our stockholders, (ii)
for acts or omissions not in good faith or, which involve intentional
misconduct or a knowing violation of law, (iii) under applicable Sections of
the Nevada Revised Statutes, (iv) the payment of dividends in violation of
Section 78.300 of the Nevada Revised Statutes or, (v) for any transaction
from which the director derived an improper personal benefit.
Our Bylaws provide for indemnification of our directors, officers, and
employees in most cases for any liability suffered by them or arising out of
their activities as directors, officers, and employees if they were not
engaged in willful misfeasance or malfeasance in the performance of his or
her duties; provided that in the event of a settlement the indemnification
will apply only when the Board of Directors approves such settlement and
reimbursement as being for the best interests of the Corporation. The Bylaws,
therefore, limit the liability of directors to the maximum extent permitted
by Nevada law (Section 78.751).
Our officers and directors are accountable to us as fiduciaries, which means
they are required to exercise good faith and fairness in all dealings affecting
us and our shareholders. In the event that a shareholder believes the officers
and/or directors have violated their fiduciary duties to us, the shareholder
may, subject to applicable rules of civil procedure, be able to bring a class
action or derivative suit to enforce the shareholders rights, including rights
under certain federal and state securities laws and regulations to recover
damages from and require an accounting by management. Shareholders who have
suffered losses in connection with the purchase or sale of their interest in us
related to that kind of sale or purchase, including the misapplication by any
officer or director of the proceeds from the sale of these securities, may be
able to recover such losses from us.
We will attempt to do the following:
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the Act) may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. |
