-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MaxxDCdhn5oihO/MQw021eeU0a4PJha37BXVEZQWMbMj57YLD5yTwpMyNB9+9UPY R8MtnkgWjmE5eZChsOpIqw== 0000948830-96-000169.txt : 19960829 0000948830-96-000169.hdr.sgml : 19960829 ACCESSION NUMBER: 0000948830-96-000169 CONFORMED SUBMISSION TYPE: 10-12G PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19960828 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALNUT CAPITAL INC CENTRAL INDEX KEY: 0001021725 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 841349553 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-12G SEC ACT: 1934 Act SEC FILE NUMBER: 000-21275 FILM NUMBER: 96622326 BUSINESS ADDRESS: STREET 1: 16178 EAST PRENTICE PLACE CITY: AURORA STATE: CO ZIP: 80015 BUSINESS PHONE: 3036906787 MAIL ADDRESS: STREET 1: 16178 EAST PRENTICE PLACE CITY: AURORA STATE: CO ZIP: 80015 10-12G 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-SB General Form for Registration of Securities of Small Business Issuers Under Section 12(b) or (g) of the Securities Exchange Act of 1934 WALNUT CAPITAL, INC. (Name of Small Business Issuer) Nevada 84-1349553 (State or Other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 16178 East Prentice Place, Aurora, Colorado 80015 (Address of Principal Executive Offices, Including Zip Code) (303) 690-6787 (Issuer's Telephone Number) Securities to be Registered Under Section 12(b) of the Act: None Securities to be Registered Under Section 12(g) of the Act: Common Stock, $.0001 Par Value (Title of Class) PART I ITEM 1. DESCRIPTION OF BUSINESS. Walnut Capital, Inc. (the "Company"), was incorporated on July 1, 1996, under the laws of the State of Nevada, to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has been in the developmental stage since inception and has no operations to date. Other than issuing shares to its original shareholders, the Company never commenced any operational activities. The Board of Directors of the Company has elected to commence implementation of the Company's principal business purpose, described below under "Item 2, Plan of Operation". As such, the Company can be defined as a "shell" company, whose sole purpose at this time is to locate and consummate a merger or acquisition with a private entity. The proposed business activities described herein classify the Company as a "blank check" company. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in the Company's securities until such time as the Company has successfully implemented its business plan described herein. Accordingly, each shareholder of the Company has executed and delivered a "lock-up" letter agreement, affirming that he/she will not sell his/her respective shares of the Company's common stock until such time as the Company has successfully consummated a merger or acquisition and the Company is no longer classified as a "blank check" company. In order to provide further assurances that no trading will occur in the Company's securities until a merger or acquisition has been consummated, each shareholder has agreed to place his/her respective stock certificate with the Company's legal counsel, who will not release these respective certificates until such time as legal counsel has confirmed that a merger or acquisition has been successfully consummated. However, while management believes that the procedures established to preclude any sale of the Company's securities prior to closing of a merger or acquisition will be sufficient, there can be no assurances that the procedures established herein will unequivocally limit any shareholder's ability to sell their respective securities before such closing. The Company's business is subject to numerous risk factors, including the following: NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company has had no operating history nor any revenues or earnings from operations. The Company has no significant assets or financial resources. The Company will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in the Company incurring a net operating loss which will increase continuously until the Company can consummate a business combination with a profitable business opportunity. There is no assurance that the Company can identify such a business opportunity and consummate such a business combination. SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS. The success of the Company's proposed plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combinations with entities having established operating histories, there can be no assurance that the Company will be successful in locating candidates meeting such criteria. In the event the Company completes a business combination, of which there can be no assurance, the success of the Company's operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond the Company's control. SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS. The Company is and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private entities. A large number of established and well-financed entities, including venture capital firms, are active in mergers and acquisitions of companies which may be desirable target candidates for the Company. Nearly all such entities have significantly greater financial resources, technical expertise and managerial capabilities than the Company and, consequently, the Company will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, the Company will also compete in seeking merger or acquisition candidates with numerous other small public companies. NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION - NO STANDARDS FOR BUSINESS COMBINATION. The Company has no arrangement, agreement or understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private entity. There can be no assurance the Company will be successful in identifying and evaluating suitable business opportunities or in concluding a business combination. Management has not identified any particular industry or specific business within an industry for evaluation by the Company. There is no assurance the Company will be able to negotiate a business combination on terms favorable to the Company. The Company has not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which it will require a target business opportunity to have achieved, and without which the Company would not consider a business combination in any form with such business opportunity. Accordingly, the Company may enter into a business combination with a business opportunity having no significant operating history, losses, limited or no potential for earnings, limited assets, negative net worth or other negative characteristics. CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While seeking a business combination, management anticipates devoting up to twenty hours per month to the business of the Company. The Company's sole officer has not entered into a written employment agreement with the Company and he is not expected to do so in the foreseeable future. The Company has not obtained key man life insurance on either of its officers or directors. Notwithstanding the combined limited experience and time commitment of management, loss of the services of any of these individuals would adversely affect development of the Company's business and its likelihood of continuing operations. See "MANAGEMENT." CONFLICTS OF INTEREST - GENERAL. The Company's officers and directors participate in other business ventures which compete directly with the Company. Additional conflicts of interest and non-arms length transactions may also arise in the future in the event the Company's officers or directors are involved in the management of any firm with which the Company transacts business. Management has adopted a policy that the Company will not seek a merger with, or acquisition of, any entity in which management serve as officers, directors or partners, or in which they or their family members own or hold any ownership interest. See "ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - CONFLICTS OF INTEREST." REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act"), requires companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one or two years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare such statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company. Acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition so long as the reporting requirements of the 1934 Act are applicable. LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has neither conducted, nor have others made available to it, results of market research indicating that market demand exists for the transactions contemplated by the Company. Moreover, the Company does not have, and does not plan to establish, a marketing organization. Even in the event demand is identified for a merger or acquisition contemplated by the Company, there is no assurance the Company will be successful in completing any such business combination. LACK OF DIVERSIFICATION. The Company's proposed operations, even if successful, will in all likelihood result in the Company engaging in a business combination with only one business opportunity. Consequently, the Company's activities will be limited to those engaged in by the business opportunity which the Company merges with or acquires. The Company's inability to diversify its activities into a number of areas may subject the Company to economic fluctuations within a particular business or industry and therefore increase the risks associated with the Company's operations. REGULATION. Although the Company will be subject to regulation under the Securities Exchange Act of 1934, management believes the Company will not be subject to regulation under the Investment Company Act of 1940, insofar as the Company will not be engaged in the business of investing or trading in securities. In the event the Company engages in business combinations which result in the Company holding passive investment interests in a number of entities, the Company could be subject to regulation under the Investment Company Act of 1940. In such event, the Company would be required to register as an investment company and could be expected to incur significant registration and compliance costs . The Company has obtained no formal determination from the Securities and Exchange Commission as to the status of the Company under the Investment Company Act of 1940 and, consequently, any violation of such Act would subject the Company to material adverse consequences. PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination involving the issuance of the Company's common stock will, in all likelihood, result in shareholders of a private company obtaining a controlling interest in the Company. Any such business combination may require management of the Company to sell or transfer all or a portion of the Company's common stock held by them, or resign as members of the Board of Directors of the Company. The resulting change in control of the Company could result in removal of one or more present officers and directors of the Company and a corresponding reduction in or elimination of their participation in the future affairs of the Company. REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION. The Company's primary plan of operation is based upon a business combination with a private concern which, in all likelihood, would result in the Company issuing securities to shareholders of such private company. The issuance of previously authorized and unissued common stock of the Company would result in reduction in percentage of shares owned by present and prospective shareholders of the Company and would most likely result in a change in control or management of the Company. DISADVANTAGES OF BLANK CHECK OFFERING. The Company may enter into a business combination with an entity that desires to establish a public trading market for its shares. A business opportunity may attempt to avoid what it deems to be adverse consequences of undertaking its own public offering by seeking a business combination with the Company. Such consequences may include, but are not limited to, time delays of the registration process, significant expenses to be incurred in such an offering, loss of voting control to public shareholders and the inability or unwillingness to comply with various federal and state laws enacted for the protection of investors. TAXATION. Federal and state tax consequences will, in all likelihood, be major considerations in any business combination the Company may undertake. Currently, such transactions may be structured so as to result in tax-free treatment to both companies, pursuant to various federal and state tax provisions. The Company intends to structure any business combination so as to minimize the federal and state tax consequences to both the Company and the target entity; however, there can be no assurance that such business combination will meet the statutory requirements of a tax-free reorganization or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes which may have an adverse effect on both parties to the transaction. REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS OPPORTUNITIES. Management of the Company believes that any potential business opportunity must provide audited financial statements for review, and for the protection of all parties to the business combination. One or more attractive business opportunities may choose to forego the possibility of a business combination with the Company, rather than incur the expenses associated with preparing audited financial statements. ITEM 2. PLAN OF OPERATION The Registrant intends to seek to acquire assets or shares of an entity actively engaged in business which generates revenues, in exchange for its securities. The Registrant has no particular acquisitions in mind and has not entered into any negotiations regarding such an acquisition. None of the Company's officers, directors, promoters or affiliates have engaged in any preliminary contact or discussions with any representative of any other company regarding the possibility of an acquisition or merger between the Company and such other company as of the date of this registration statement. The Company's Board of Directors intends to provide the Company's shareholders with complete disclosure documentation concerning a potential business opportunity and the structure of the proposed business combination prior to consummation of the same, which disclosure is intended to be in the form of a proxy statement. While such disclosure may include audited financial statements of such a target entity, there is no assurance that such audited financial statements will be available. The Board of Directors does intend to obtain certain assurances of value of the target entity's assets prior to consummating such a transaction, with further assurances that an audited statement would be provided within seventy-five days after closing of such a transaction. Closing documents relative thereto will include representations that the value of the assets conveyed to or otherwise so transferred will not materially differ from the representations included in such closing documents. The Registrant has no full time employees. The Registrant's President has agreed to allocate a portion of his time to the activities of the Registrant, without compensation. The President anticipates that the business plan of the Company can be implemented by his devoting approximately 10 hours per month to the business affairs of the Company and, consequently, conflicts of interest may arise with respect to the limited time commitment by such officer. See "ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS." Mr. Brasel is involved with several other blank check companies, and both directors are involved creating three other blank check companies similar to this one. In addition, the Company's officers and directors may, in the future, become involved with other companies which have a business purpose similar to that of the Company. As a result, additional conflicts of interest may arise in the future. If such a conflict does arise and an officer or director of the Company is presented with a business opportunity under circumstances where there may be a doubt as to whether the opportunity should belong to the Company or another "blank check" company they are affiliated with, they will disclose the opportunity to all such companies. If a situation arises in which more than one company desires to merge with or acquire that target company and the principals of the proposed target company have no preference as to which company will merge or acquire such target company, the company of which Mr. Brasel first became an officer and director will be entitled to proceed with the transaction. As between the Company and the three other companies formed on July 1, 1996, the company which first filed a registration statement with the Securities and Exchange Commission will be entitled to proceed with the proposed transaction. See "ITEM 5, DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - PREVIOUS BLIND POOL ACTIVITIES." The Company is filing this registration statement on a voluntary basis because the primary attraction of the Registrant as a merger partner or acquisition vehicle will be its status as an SEC reporting company. Any business combination or transaction will likely result in a significant issuance of shares and substantial dilution to present stockholders of the Registrant. The Articles of Incorporation of the Company provides that the Company may indemnify officers and/or directors of the Company for liabilities, which can include liabilities arising under the securities laws. Therefore, assets of the Company could be used or attached to satisfy any liabilities subject to such indemnification. See "ITEM 12, INDEMNIFICATION OF DIRECTORS AND OFFICERS." GENERAL BUSINESS PLAN The Company's purpose is to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of an Exchange Act registered corporation. 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. This discussion of the proposed business 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. Management anticipates that it will be able to participate in only one potential business venture because the Company has nominal assets and limited financial resources. See Item F/S, "Financial Statements." This lack of diversification should be considered a substantial risk to shareholders of the Company because it will not permit the Company to offset potential losses from one venture against gains from another. The Company may seek a business opportunity with entities which have recently commenced operations, or which wish to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. The Company may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries. The Company anticipates that the selection of a business opportunity in which to participate will be complex and extremely risky. Due to 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 perceived benefits of a publicly registered corporation. Such perceived benefits may include facilitating or improving the terms on which additional equity financing may be sought, providing liquidity for incentive stock options or similar benefits to key employees, providing liquidity (subject to restrictions of applicable statutes) for all shareholders and other factors. Business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. The Company has, and will continue to have, no capital with which to provide the owners of business opportunities with any significant cash or other assets. However, management believes the Company will be able to offer owners of acquisition candidates the opportunity to acquire a controlling ownership interest in a publicly registered company without incurring the cost and time required to conduct an initial public offering. The owners of the business opportunities will, however, incur significant legal and accounting costs in connection with the acquisition of a business opportunity, including the costs of preparing Form 8-K's, 10-K's or 10-KSB's, agreements and related reports and documents. The Securities Exchange Act of 1934 (the "34 Act"), specifically requires that any merger or acquisition candidate comply with all applicable reporting requirements, which include providing audited financial statements to be included within the numerous filings relevant to complying with the 34 Act. 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. The analysis of new business opportunities will be undertaken by, or under the supervision of, the officers and directors of the Company, none of whom is a professional business analyst. Management intends to concentrate on identifying preliminary prospective business opportunities which may be brought to its attention through present associations of the Company's President and its two directors, or by the Company's shareholders. 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 operations, if any; prospects for the future; nature of present and expected competition; the quality and experience of management services which may be available and the depth of that management; the potential for further research, development, or exploration; specific risk factors not now foreseeable but which then may be anticipated to impact the proposed activities of the Company; the potential for growth or expansion; the potential for profit; the perceived public recognition or acceptance of products, services, or trades; name identification; and other relevant factors. Management will meet personally with management and key personnel of 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 within a reasonable period of time after closing of the proposed transaction. Management of the Company, while not especially experienced in matters relating to the new business of the Company, will rely upon their own efforts and, to a much lesser extent, the efforts of the Company's shareholders, in accomplishing the business purposes of the Company. It is not anticipated that any outside consultants or advisors, other than the Company's legal counsel and accountants, will be utilized by the Company to effectuate its business purposes described herein. However, if the Company does retain such an outside consultant or advisor, any cash fee earned by such party will need to be paid by the prospective merger/acquisition candidate, as the Company has no cash assets with which to pay such obligation. There have been no contracts or agreements with any outside consultants and none are anticipated in the future. The Company will not restrict its search for any specific kind of firms, 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 impossible to predict at this time the status of any business in which the Company may become engaged, in that such business may need to seek additional capital, may desire to have its shares publicly traded, or may seek other perceived advantages which the Company may offer. However, the Company does not intend to obtain funds in one or more private placements to finance the operation of any acquired business opportunity until such time as the Company has successfully consummated such a merger or acquisition. 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, or licensing agreement with another corporation or entity. It may also acquire stock or assets of an existing business. On the consummation of a transaction, it is probable that the present management and shareholders of the Company will no longer be in control of the Company. In addition, the Company's directors may, as part of the terms of the acquisition transaction, resign and be replaced by new directors without a vote of the Company's shareholders or may sell their stock in the Company. Any terms of sale of the shares presently held by officers and/or directors of the Company will be also afforded to all other shareholders of the Company on similar terms and conditions. Any and all such sales will only be made in compliance with the securities laws of the United States and any applicable state. It is anticipated that any securities issued in any such reorganization would be issued in reliance upon exemption from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of its transaction, the Company may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter. If such registration occurs, of which there can be no assurance, it will be undertaken by the surviving entity after the Company has successfully consummated a merger or acquisition and the Company is no longer considered a "shell" company. Until such time as this occurs, the Company will not attempt to register any additional securities. The issuance of substantial additional securities and their potential sale into any trading market which may develop in the Company's securities may have a depressive effect on the value of the Company's securities in the future, if such a market develops, of which there is no assurance. 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 368a or 351 of the Internal Revenue Code (the "Code"). With respect to any merger or acquisition, negotiations with target company management is expected to focus on the percentage of the Company which target company shareholders would acquire in exchange for all of their shareholdings in the target company. Depending upon, among other things, the target company's assets and liabilities, the Company's shareholders will in all likelihood hold a substantially lesser percentage ownership interest in the Company following any merger or acquisition. The percentage ownership may be subject to significant reduction in the event the Company acquires a target company with substantial assets. Any merger or acquisition effected by the Company can be expected to have a significant dilutive effect on the percentage of shares held by the Company's then-shareholders. While management of the Company anticipates obtaining the approval of the shareholders of the Company via a Proxy Statement, the effect will be to assure such approval where management supports such a business transaction because management presently controls sufficient shares of the Company to effectuate a positive vote on the proposed transaction. The Company will participate in a business opportunity only after the negotiation and execution of appropriate written agreements. Although the terms of such agreements cannot be predicted, generally such agreements will require some specific representations and warranties by all of the parties thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by each of the parties prior to and after such closing, will outline the manner of bearing costs, including costs associated with the Company's attorneys and accountants, will set forth remedies on default and will include miscellaneous other terms. As stated hereinabove, the Company will not acquire or merge with any entity which cannot provide independent audited financial statements within a reasonable period of time after closing of the proposed transaction. The Company is subject to all of the reporting requirements included in the 34 Act. Included in these requirements is the affirmative duty of the Company to file independent audited financial statements as part of its Form 8-K to be filed with the Securities and Exchange Commission upon consummation of a merger or acquisition, as well as the Company's audited financial statements included in its annual report on Form 10-K (or 10-KSB, as applicable). If such audited financial statements are not available at closing, or within time parameters necessary to insure the Company's compliance with the requirements of the 34 Act, or if the audited financial statements provided do not conform to the representations made by the candidate to be acquired in the closing documents, the closing documents may provide that the proposed transaction will be voidable, at the discretion of the present management of the Company. COMPETITION The Company will remain an insignificant participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns which have significantly greater financial and personnel resources and technical expertise than the Company. In view of the Company's combined extremely limited financial resources and limited management availability, the Company will continue to be at a significant competitive disadvantage compared to the Company's competitors. ITEM 3. DESCRIPTION OF PROPERTY The Registrant has no properties and at this time has no agreements to acquire any properties. ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth, as of August 26, 1996, each person known by the Company to be the beneficial owner of five percent or more of the Company's Common Stock, all Directors individually and all Directors and Officers of the Company as a group. Except as noted, each person has sole voting and investment power with respect to the shares shown.
Name and Address Amount of Beneficial of Beneficial Owner Ownership Percentage of Class ------------------- -------------------- ------------------- Timothy J. Brasel 525,000 42.0% 16178 E. Prentice Place Aurora, CO 80015 James R. Sjoerdsma 125,000 10.0% 529 Seastorm Drive Redwood City, CA 94065 J. J. Peirce 100,000 8.0% 5125 West Lake Avenue Littleton, CO 80123 Paul H. Dragul 500,000 40.0% 950 E. Harvard, No. 500 Denver, CO 80210 Brasel Family Partners, Ltd. 200,000 16.0% 16178 E. Prentice Place Aurora, CO 80015 Charitable Remainder Trust 75,000 6.0% of Timothy J. Brasel 16178 E. Prentice Place Aurora, CO 80015 Janet M. Brasel, Custodian 75,000 6.0% for Tyler J. Brasel 16178 E. Prentice Place Aurora, CO 80015 Janet M. Brasel, Custodian 75,000 6.0% for Colton R. Brasel 16178 E. Prentice Place Aurora, CO 80015 Janet M. Brasel, Custodian 50,000 4.0% for Justin T. Brasel 16178 E. Prentice Place Aurora, CO 80015 All Executive Officers and 650,000 52.0% Directors as a Group (2 Persons) __________________ Includes 75,000 shares held by the Charitable Remainder Trust of Timothy J. Brasel; 50,000 shares held by the Charitable Remainder Trust of Mary Jane Brasel; 200,000 shares held by Brasel Family Partners; and 200,000 shares held by Janet M. Brasel as custodian for Tyler, Colton and Justin Brasel. Mr. Brasel is a trustee for the Charitable Remainder Trust of Timothy J. Brasel and the General Partner of Brasel Family Partners, Ltd.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS. The Directors and Officers of the Company are as follows: Name Age Positions and Offices Held ---- --- -------------------------- Timothy J. Brasel 37 President, Secretary, Treasurer and Director James R. Sjoerdsma 35 Director In addition to the two officers and directors listed above, the following persons could also be deemed to be promoters and/or control persons of the Company, as those terms are defined in the Rules and Regulations promulgated under the Securities Act of 1933, as amended: Dr. Paul Dragul -- Shareholder J. J. Peirce -- Shareholder There is no family relationship between any Director or Executive Officer of the Company. The Company presently has no committees. Set forth below are the names of all Directors and Executive Officers of the Company, all positions and offices with the Company held by each such person, the period during which he has served as such, and the business experience of such persons during at least the last five years: TIMOTHY J. BRASEL. Mr. Brasel has served as President, Secretary, Treasurer and a director of the Company since July 1, 1996. He also serves as President and a Director of four other publicly-held "shells": Universal Capital Corp., Beechport Capital Corp.; High Hopes, Inc.; and Capital 2000, Inc. He also serves as a director of three other companies which were formed at the same time and for the same purpose as the Company. These companies are Aspen Capital, Inc., Mahogany Capital, Inc. and Cypress Capital, Inc. From March 1990 until September 1994, Mr. Brasel served as President, Secretary, Treasurer and a Director of Prentice Capital, Inc., a publicly-held blank-check company which completed an acquisition of Universal Footcare, Inc. From March 1990 until August 1993, Mr. Brasel was President, Secretary and a Director of Brasel Ventures, Inc., a publicly-held blank-check company, which completed an acquisition of American Pharmaceutical Company. From April 1990 to February 1992, Mr. Brasel served as President, a Director and sole shareholder of Central Securities Transfer Corporation, a stock transfer company which is no longer in business. From January 1989 to May 1992, Mr. Brasel served as a Director of Coalmont, Inc., a publicly-held blank-check company that completed an acquisition of MCC Holdings, Inc. during May 1992. From July 1987 until May 1990, Mr. Brasel served as President of Eagle Vision, Inc., a publicly-held blank-check company that completed an acquisition of UMA Management Associates, Inc. From November 1988 to June 1990, he also served as President and a Director of L.I. Inc., a publicly-held blank-check company which completed an acquisition of Imaging Management Associates, Inc. Since January 1987, Mr. Brasel has been President and a Director of Bleu Ridge Consultants, Inc., a business and management consulting firm located in Denver, Colorado. Mr. Brasel received a Bachelor of Science Degree in Business Administration from Morningside College, Sioux City, Iowa in 1980. JAMES R. SJOERDSMA. Mr. Sjoerdsma has served as a Director of the Company since July 1996. He also serves as a director of three other companies which were formed at the same time and for the same purpose as the Company. These companies are Aspen Capital, Inc., Mahogany Capital, Inc. and Cypress Capital, Inc. Mr. Sjoerdsma has been employed by Genencor International, Inc., Palo Alto, California, since 1990. He currently served as Director, Worldwide Human Resources, Research and Development for Genencor. From 1982 until 1990, he was employed by Rockwell International as Manager of Human Resources. Mr. Sjoerdsma has been written up in several publications for pioneering some of the most advanced pay and people systems. He received an MBA Degree with high honors from Novo University in 1987, and a Bachelor of Science Degree (Cum Laude) in economics and business from Cornell College in 1982. He received his SPHR (Senior Professional Human Resources) certificate in 1992. Mr. Sjoerdsma served as a director of Grason Industries, Inc., a blank-check company, from January 1988 until March 1989, when it completed an acquisition; he served as a director of Emerald Eagle Corp., a blank-check company, from September 1987 until May 1992; and he served as President and a director of Tipton Industries, Inc., a blank-check company, from April 1987 until December 1987, when it completed an acquisition. Mr. Sjoerdsma also founded Peppy's Ice Cream, Inc., in 1987, in Palo, Iowa. He co-owned the business until 1994 when he sold it to relocate to California. Peppy's Ice Cream is one of the largest distributors of novelty ice cream products in the Cedar Rapids, Iowa City and Waterloo area. PREVIOUS BLANK-CHECK EXPERIENCE Mr. Timothy J. Brasel, President, Secretary, Treasurer and a Director of the Company, has been involved either as an officer or director, or both, with twelve other blank-check companies which have completed some form of corporate reorganization. These companies are Cambridge Ventures, Inc., Fox Ridge Capital, Inc., Crystal Gold, Ltd., Extare Corporation, Ivory Coast, Inc., L.I. Inc., Eagle Vision, Inc., Coalmont, Inc., Brasel Ventures, Inc., Prentice Capital, Inc., and Eagle Eye Enterprises, Inc. Mr. Sjoerdsma, a Director of the Company, has been involved either as an officer or a director, or both, with three other blank-check companies which have completed some form of corporate reorganization. These companies are Emerald Eagle Corp., Grason Industries, Inc., and Tipton Industries, Inc. Following is a summary of the previous blank-check companies which have completed their public offerings: Cambridge Ventures, Inc. ("Cambridge") closed its public offering on March 14, 1986, and raised a total of $200,000 gross proceeds by selling 10,000,000 units at $.02 per unit. During July, 1986, Cambridge completed a reverse acquisition of Elkins Institute in Atlanta, Inc. ("Elkins"). Elkins owned and operated a private school in Atlanta, Georgia, which provides technical training in the field of electronics, computer technology, and radio/TV broadcasting. In connection with the acquisition of Cambridge, Timothy J. Brasel sold 3,000,000 shares to principals of Elkins for a total consideration of $9,859. Tipton Industries, Inc. closed its public offering during October 1987 and completed a reverse acquisition of FiberChem, Inc. during December 1987. Fox Ridge Capital, Inc. ("Fox Ridge") closed its public offering in October, 1988, and raised a total of $600,000 in gross proceeds by selling 60,000,000 shares at $.01 per share. During March, 1989, Fox Ridge completed a reverse acquisition of R. V. Seahawk, Inc., an oceanographic services company which is involved in deep water search, survey and recovery operations. In connection with the acquisition of Seahawk, Timothy J. Brasel sold 25,000,000 shares to principals of Seahawk for a price of $.0008 per share or $20,000 for Mr. Brasel. In addition, subsequent to the acquisition of Seahawk, Tim Brasel sold 15,000,000 warrants to principals of Seahawk for a price of $.0015 per warrant or $22,500. Crystal Gold, Ltd. ("Crystal Gold") closed its public offering in October, 1988, and raised a total of $322,500 in gross proceeds by selling 64,500,000 shares at $.005 per share. During June, 1989, Crystal Gold completed a reverse acquisition of Morgan Medical Corp. ("Morgan"). Morgan is engaged in the business of serving as consultant and project manager for physicians interested in developing and operating magnetic resonance imaging, lithography and ambulatory surgery centers. In connection with the acquisition of Morgan, Tim Brasel sold 16,000,000 shares and 18,000,000 warrants to principals of Morgan for a total consideration of $21,334. Grason Industries, Inc. ("Grason") closed its public offering in May, 1988, and raised a total of $407,500 in gross proceeds by selling 4,075,000 shares at $.10 per share. During March, 1989, Grason completed a reverse acquisition of Jan & Craig's Window Factory, Ltd. ("Jan & Craig's"), a company in the business of selling replacement windows in the New York metropolitan area. During the period from March, 1989 through August, 1989, all of the funds in Grason were expended. On August 30, 1989, an agreement unwinding the acquisition was entered into between Grason and Jan & Craig's. Pursuant thereto all of the shares issued in connection with the acquisition were canceled and Jan & Craig's signed a note payable to Grason for $265,000. On September 8, 1989, Jan & Craig's filed a petition under Chapter 11 of the U.S. Bankruptcy Code. The original management of Grason was reinstated. The transaction with Jan & Craig's was unwound because the management of Jan & Craig's anticipated the bankruptcy filing and after discussions with prior management of Grason, both sides agreed that it would be in the best interests of the shareholders of Grason to unwind the transaction and attempt to find a new merger candidate. In connection with the acquisition of Jan & Craig's, Tim Brasel sold 450,000 shares to an associate of Jan & Craig's for a price of $.04 per share or $18,000. During April 1994, Grason completed a reverse acquisition of Electronic Technology Group, Inc., a Minnesota-based computer manufacturer. Grason changed its name to ETG International, Inc. During 1995, ETG filed for bankruptcy. Extare Corporation ("Extare") closed its public offering during June, 1988, and raised a total of $595,000 gross proceeds by selling 11,900,000 shares at $.05 per share. During October, 1989, Extare completed an acquisition of NCS Acquisitions Corp. ("NCS"), a company which had a P.C. based software system which allows credit union members to shop for automobiles and other consumer goods at discounted prices. In connection with the acquisition of NCS, Timothy J. Brasel sold an option to buy his B warrants to the principal shareholder of NCS. In consideration for the option, Mr. Brasel received $3,937.50. The option granted the holder the right to purchase B warrants at a price of $.01 per Warrant. The option was never exercised. During September 1996, NCS (which had no assets and liabilities of approximately $68,560) was sold to a former officer/shareholder and a director of Extare. During July 1995, Extare completed an acquisition of Infi-Shield Corporation, a Minnesota corporation which had developed a line of products used as external protective shielding for water/sewer lines, manholes and catch basins. L. I. Inc. closed its public offering in May, 1989, and raised a total of $50,000 in gross proceeds by selling 2,500,000 shares at $.02 per share. During June, 1990, L. I. Inc. completed a reverse acquisition of Imaging Management Associates, Inc. ("IMA"). IMA operates nine outpatient centers that provide diagnostic imaging services. Generally, these centers provide magnetic resonance imaging, and, in some centers, CAT Scan, mammography and general diagnostic x-ray services. In connection with this transaction, Timothy J. Brasel sold an option to purchase up to 966,000 units (each unit consisting of one share of common stock and two warrants) of L. I. Inc. held by him to two outside investors. Mr. Brasel received $4,830 for this option, and he received an additional $4,830 on the exercise of the option. Emerald Eagle Corp. closed its public offering in September, 1988, and raised a total of $50,000 in gross proceeds by selling 2,500,000 Units at $.02 per Unit. Emerald Eagle did not complete an acquisition while Mr. Sjoerdsma was a director. During May 1992, Mr. Sjoerdsma and Mr. Brasel (a principal shareholder) and the other major shareholders sold approximately 80% of their shares in Emerald Eagle to an outside third party who then took control of the company. Mr. Sjoerdsma received $1,000 for his shares and Brasel Family Partners, Ltd. received $10,200 for its shares. Ivory Coast, Inc. closed its public offering in September, 1989, and raised a total of $600,000 in gross proceeds by selling 6,000,000 Units at $6.00 per Unit. During November, 1989, Ivory Coast completed an acquisition of Continental Management Group, Inc. ("Continental"), a Florida corporation, which had an option to acquire Musselman Steel Corporation of Tampa, Florida. In connection with the acquisition of Continental, Mr. Brasel sold a total of 16,875,000 warrants to the principal of Continental at a price of $.001 per warrant or a total of $16,875. Brasel Ventures, Inc. closed its public offering in November, 1990, and raised a total of $75,000 in gross proceeds by selling 7,500,000 Units at $.01 per Unit. During July 1993, Brasel Ventures completed a reverse acquisition of American Pharmaceutical Company, a New Jersey corporation engaged in the business of packaging and distributing non-prescription OTC pharmaceutical and vitamin products. Eagle Vision, Inc. ("Eagle Vision") closed its public offering in January, 1990, and raised a total of $299,040 by selling 49,840 Units at $6.00 per Unit. During April, 1990, Eagle Vision completed an acquisition of UMA Management Associates, Inc. ("UMA"), a Tampa, Florida, based company which had an option to acquire Novadyne Corporation. In connection with the acquisition of UMA, Mr. Brasel sold a total of 35,621,250 warrants to the principals of UMA at an average price of $.00056 per warrant or a total of $20,000. Eagle Eye Enterprises, Inc. ("Eagle Eye") closed its public offering in August 1990, and raised a total of $200,000 in gross proceeds by selling 20,000,000 shares at $.01 per share. Eagle Eye completed a reverse acquisition of Atlas Environmental, Inc. during November 1994. Prentice Capital, Inc. ("Prentice") closed its public offering during August 1991, and raised a total of $75,000 in gross proceeds by selling 7,500,000 units at $.01 per unit. During September 1994, Prentice completed a reverse acquisition of Universal Footcare, Inc., a company which is engaged in the business of acquiring and operating podiatry clinics in Florida. In connection with the closing of this transaction, Prentice issued 130,000 shares (after a 1 for 25 reverse split) to La Mirage Trust as consideration for its agreement to not sell its 200,000 shares for one year from the closing. Mr. Brasel is a trustee of La Mirage Trust. Coalmont, Inc. ("Coalmont") closed its public offering during March 1991, and raised a total of $100,000 in gross proceeds by selling 10,000 units at $10.00 per unit. During August 1992, Coalmont completed a reverse acquisition of Machinery Credit Corporation, a company engaged in the business of financing manufacturing equipment and distribution systems for manufacturing companies and distributors. On December 31, 1993, the agreement with Machinery Credit Corporation was rescinded because the management which was installed in August 1992 spent all of Coalmont's money and quit filing periodic reports with the SEC. All of the shares issued in the acquisition were returned and canceled and the original officers and directors of Coalmont were installed. Coalmont has since changed its name to Beechport Capital Corp. and is currently looking for an acquisition. CONFLICTS OF INTEREST The Company's two officers and directors have organized three other companies of a similar nature and with a similar purpose as the Company. In addition, Mr. Brasel serves as President and a director of four publicly-held shell companies which are in the same business as the Company. Consequently, there are potential inherent conflicts of interest in Mr. Brasel and Mr. Sjoerdsma acting as officers and directors of the Company. Insofar as the officers and directors are engaged in other business activities, management anticipates it will devote only a minor amount of time to the Company's affairs. The officers and directors of the Company may in the future become shareholders, officers or directors of other companies which may be formed for the purpose of engaging in business activities similar to those conducted by the Company. The Company does not currently have a right of first refusal pertaining to opportunities that come to management's attention insofar as such opportunities may relate to the Company's proposed business operations. The officers and directors are, so long as they are officers or directors of the Company, subject to the restriction that all opportunities contemplated by the Company's plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to the Company and the companies that they are affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If a situation arises in which more than one company desires to merge with or acquire that target company and the principals of the proposed target company have no preference as to which company will merge or acquire such target company, the company of which Mr. Brasel first became an officer and director will be entitled to proceed with the transaction. As between the Company and the three other companies formed on July 1, 1996, the company which first filed a registration statement with the Securities and Exchange Commission will be entitled to proceed with the proposed transaction. Except as set forth above, the Company has not adopted any other conflict of interest policy with respect to such transactions. INVESTMENT COMPANY ACT OF 1940 Although the Company will be subject to regulation under the Securities Act of 1933 and the Securities Exchange Act of 1934, management believes the Company will not be subject to regulation under the Investment Company Act of 1940 insofar as the Company will not be engaged in the business of investing or trading in securities. In the event the Company engages in business combinations which result in the Company holding passive investment interests in a number of entities, the Company could be subject to regulation under the Investment Company Act of 1940. In such event, the Company would be required to register as an investment company and could be expected to incur significant registration and compliance costs. The Company has obtained no formal determination from the Securities and Exchange Commission as to the status of the Company under the Investment Company Act of 1940 and, consequently, any violation of such Act would subject the Company to material adverse consequences. ITEM 6. EXECUTIVE COMPENSATION. None of the Company's officers and/or directors receive any compensation for their respective services rendered to the Company, nor have they received such compensation in the past. They both have agreed to act without compensation until authorized by the Board of Directors, which is not expected to occur until the Registrant has generated revenues from operations after consummation of a merger or acquisition. As of the date of this registration statement, the Company has no funds available to pay directors. Further, none of the directors are accruing any compensation pursuant to any agreement with the Company. It is possible that, after the Company successfully consummates a merger or acquisition with an unaffiliated entity, that entity may desire to employ or retain one or more members of the Company's management for the purposes of providing services to the surviving entity, or otherwise provide other compensation to such persons. However, the Company has adopted a policy whereby the offer of any post-transaction remuneration to members of management will not be a consideration in the Company's decision to undertake any proposed transaction. Each member of management has agreed to disclose to the Company's Board of Directors any discussions concerning possible compensation to be paid to them by any entity which proposes to undertake a transaction with the Company and further, to abstain from voting on such transaction. Therefore, as a practical matter, if each member of the Company's Board of Directors is offered compensation in any form from any prospective merger or acquisition candidate, the proposed transaction will not be approved by the Company's Board of Directors as a result of the inability of the Board to affirmatively approve such a transaction. It is possible that persons associated with management may refer a prospective merger or acquisition candidate to the Company. In the event the Company consummates a transaction with any entity referred by associates of management, it is possible that such an associate will be compensated for their referral in the form of a finder's fee. It is anticipated that this fee will be either in the form of restricted common stock issued by the Company as part of the terms of the proposed transaction, or will be in the form of cash consideration. However, if such compensation is in the form of cash, such payment will be tendered by the acquisition or merger candidate, because the Company has insufficient cash available. The amount of such finder's fee cannot be determined as of the date of this registration statement, but is expected to be comparable to consideration normally paid in like transactions. No member of management of the Company will receive any finders fee, either directly or indirectly, as a result of their respective efforts to implement the Company's business plan outlined herein. No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Registrant for the benefit of its employees. ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. On July 1, 1996, the Company issued a total of 1,250,000 shares of Common Stock to the following persons for a total of $12,500 in cash: NAME NUMBER OF SHARES TOTAL CONSIDERATION James R. Sjoerdsma 125,000 $ 1,250 J. J. Peirce 100,000 $ 1,000 Charitable Remainder Trust of Timothy J. Brasel 75,000 $ 750 Charitable Remainder Trust of Mary Jane Brasel 50,000 $ 500 Brasel Family Partners, Ltd. 200,000 $ 2,000 Janet M. Brasel, Custodian for Tyler Jay Brasel 75,000 $ 750 Janet M. Brasel, Custodian for Colton R. Brasel 75,000 $ 750 Janet M. Brasel, Custodian for Justin Thomas Brasel 50,000 $ 500 Paul H. Dragul 500,000 $ 5,000 --------- ------- Total 1,250,000 $12,500 The proposed business activities described herein classify the Company as a "blank check" company. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in the Company's securities until such time as the Company has successfully implemented its business plan described herein. Accordingly, each shareholder of the Company has executed and delivered a "lock-up" letter agreement, affirming that he/she shall not sell his/her respective shares of the Company's common stock until such time as the Company has successfully consummated a merger or acquisition and the Company is no longer classified as a "blank check" company. In order to provide further assurances that no trading will occur in the Company's securities until a merger or acquisition has been consummated, each shareholder has agreed to place his/her respective stock certificate with the Company's legal counsel, who will not release these respective certificates until such time as legal counsel has confirmed that a merger or acquisition has been successfully consummated. However, while management believes that the procedures established to preclude any sale of the Company's securities prior to closing of a merger or acquisition will be sufficient, there can be no assurances that the procedures established herein will unequivocally limit any shareholder's ability to sell their respective securities before such closing. ITEM 8. DESCRIPTION OF SECURITIES. COMMON STOCK The Company's Articles of Incorporation authorize the issuance of 100,000,000 shares of Common Stock, $.0001 par value. Each record holder of Common Stock is entitled to one vote for each share held on all matters promptly submitted to the stockholders for their vote. Cumulative voting for the election of directors is not permitted by the Articles of Incorporation. Holders of outstanding shares of Common Stock are entitled to such dividends as may be declared from time to time by the Board of Directors out of legally available funds; and, in the event of liquidation, dissolution or winding up of the affairs of the Company, holders are entitled to receive, ratably, the net assets of the Company available to stockholders after distribution is made to the preferred stockholders, if any, who are given preferred rights upon liquidation. Holders of outstanding shares of Common Stock are, and all unissued shares when offered and sold will be, duly authorized, validly issued, fully paid, and nonassessable. To the extent that additional shares of the Company's Common Stock are issued, the relative interests of the existing stockholders may be diluted. PREFERRED STOCK The Company's Articles of Incorporation authorize the issuance of 5,000,000 shares of Preferred Stock, $.0001 par value. The Board of Directors of the Company is authorized to issue the Preferred Stock from time to time in series and is further authorized to establish such series, to fix and determine the variations in the relative rights and preferences as between series, to fix voting rights, if any, for each series, and to allow for the conversion of Preferred Stock into Common Stock. At present, no Preferred Stock is issued or outstanding or contemplated to be issued. DIVIDENDS No dividends have been paid by the Company on any of its securities in the past and such dividends are not contemplated in the foreseeable future. PART II ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. There is no trading market for the Registrant' s Common Stock at present and there has been no trading market to date. Management has not undertaken any discussions, preliminary or otherwise, with any prospective market maker concerning the participation of such market maker in the aftermarket for the Company's securities and management does not intend to initiate any such discussions until such time as the Company has consummated a merger or acquisition. There is no assurance that a trading market will ever develop or, if such a market does develop, that it will continue. (a) MARKET PRICE. The Registrant's Common Stock is not quoted at the present time. Effective August 11, 1993, the Securities and Exchange Commission adopted Rule 15g-9, which established the definition of a "penny stock," for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The National Association of Securities Dealers, Inc. (the "NASD"), which administers NASDAQ, has recently made changes in the criteria for continued NASDAQ eligibility. In order to continue to be included on NASDAQ, a company must maintain $2,000,000 in total assets, a $200,000 market value of its publicly-traded securities and $1,000,000 in total capital and surplus. In addition, continued inclusion requires two market-makers and a minimum bid price of $1.00 per share, provided, however, that if a company falls below such minimum bid price it will remain eligible for continued inclusion on NASDAQ if the market value of its publicly-traded securities is at least $1,000,000 and the Company has $2,000,000 in capital and surplus. Management intends to strongly consider undertaking a transaction with any merger or acquisition candidate which will allow the Company's securities to be traded without the aforesaid limitations. However, there can be no assurances that, upon a successful merger or acquisition, the Company will qualify its securities for listing on NASDAQ or some other national exchange, or be able to maintain the maintenance criteria necessary to insure continued listing. The failure of the Company to qualify its securities or to meet the relevant maintenance criteria after such qualification in the future may result in the discontinuance of the inclusion of the Company's securities on a national exchange. In such events, trading, if any, in the Company's securities may then continue in the non-NASDAQ over-the-counter market. As a result, a shareholder may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, the Company's securities . (b) HOLDERS. There are nine (9) holders of the Company's Common Stock. In July 1996, the Company issued 1,250,000 of its Common Shares to these persons for cash at $.01 per share ($12,500). All of the issued and outstanding shares of the Company's Common Stock were issued in accordance with the exemption from registration afforded by Section 4(2) of the Securities Act of 1933. (c) DIVIDENDS. The Registrant has not paid any dividends to date, and has no plans to do so in the immediate future. ITEM 2. LEGAL PROCEEDINGS. There is no litigation pending or threatened by or against the Company. ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The Registrant has not changed accountants since its formation and there are no disagreements with the findings of said accountants. ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES. During the past three years, the Registrant has sold securities which were not registered as follows: DATE NAME NUMBER OF SHARES CONSIDERATION July 1, 1996 James Ray Sjoerdsma 125,000 $ 1,250.00 July 1, 1996 J. J. Peirce 100,000 $ 1,000.00 July 1, 1996 Charitable Remainder Trust of Timothy J. Brasel 75,000 $ 750.00 July 1, 1996 Charitable Remainder Trust of Mary Jane Brasel 50,000 $ 500.00 July 1, 1996 Brasel Family Partners, Ltd. 200,000 $ 2,000.00 July 1, 1996 Janet M. Brasel, Cus- todian for Tyler Jay Brasel 75,000 $ 750.00 July 1, 1996 Janet M. Brasel, Cus- todian for Colton R. Brasel 75,000 $ 750.00 July 1, 1996 Janet M. Brasel, Cus- todian for Justin Thomas Brasel 50,000 $ 500.00 July 1, 1996 Paul H. Dragul 500,000 $ 5,000.00 --------- ---------- Total 1,250,000 $12,500.00 With respect to the sales made, the Registrant relied on Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the shares. The securities were offered for investment only and not for the purpose of resale or distribution, and the transfer thereof was appropriately restricted. All of the shareholders of the Company have executed and delivered a "lock-up" letter agreement which provides that each such shareholder shall not sell his/her respective securities until such time as the Company has successfully consummated a merger or acquisition. Further, each shareholder has placed his/her respective stock certificate with the Company's legal counsel, who has been instructed not to release any of the certificates until the Company has closed a merger or acquisition. Any liquidation by the current shareholders after the release from the "lock-up" selling limitation period may have a depressive effect upon the trading price of the Company's securities in any future market which may develop. In general, under Rule 144, a person (or persons whose shares are aggregated) who has satisfied a two year holding period, under certain circumstances, may sell within any three-month period a number of shares which does not exceed the greater of one percent of the then outstanding Common Stock or the average weekly trading volume during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of shares without any quantity limitation by a person who has satisfied a three-year holding period and who is not, and has not been for the preceding three months, an affiliate of the Company. ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, Director or Officer of the Registrant is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows: (a) Section 78.751 of the Nevada Business Corporation Act provides that each corporation shall have the following powers: "1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. 2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction, determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. 3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. 4. Any indemnification under subsections 1 and 2, unless ordered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders; (b) By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel, in a written opinion; or (d) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. 5. The certificate or articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than director or officers may be entitled under any contract or otherwise by law. 6. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section: (a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the certificate or articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2 or for the advancement of expenses made pursuant to subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. (b) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person." (b) Article VII of the Registrant's Articles of Incorporation provides in general that the Registrant is authorized to indemnify its Officers and Directors in excess of the indemnification expressly permitted by Section 78.751 of the Nevada Business Corporation Act for breach of duty to the corporation and its shareholders, subject only to the applicable limits upon such indemnification as set forth in the Nevada Business Corporation Act. PART F/S FINANCIAL STATEMENTS. Attached are audited financial statements for the Company for the period ended July 5, 1996. The following financial statements are attached to this report and filed as a part thereof. See pages F-1 through F-7. 1) Table of Contents - Financial Statements 2) Report of Independent Certified Public Accountants 3) Balance Sheet 4) Statement of Operations 5) Statement of Changes in Stockholders' Equity 6) Statement of Cash Flows 7) Notes to Financial Statements PART IV ITEM 1. EXHIBIT INDEX. EXHIBIT NUMBER DESCRIPTION LOCATION (2) Articles of Incorporation and Bylaws: 2.1 Articles of Incorporation Attached 2.2 Bylaws Attached (3) Instruments Defining the Rights of Holders: 3.1 Copies of All Lock-up Agree- ments by the Nine Company Shareholders Attached (10)(a) Consents - Experts: 10.1 Consent of Schumacher & Associates, Inc. Attached INDEX TO FINANCIAL STATEMENTS WALNUT CAPITAL, INC. (A Development Stage Company) FINANCIAL STATEMENTS with REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Report of Independent Certified Public Accountants F-2 Financial Statements: Balance Sheet F-3 Statement of Operations F-4 Statement of Changes in Stockholders' Equity F-5 Statement of Cash Flows F-6 Notes to Financial Statements F-7 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Walnut Capital, Inc. Aurora, CO We have audited the accompanying balance sheet of Walnut Capital, Inc. (a development-stage company) as of July 5, 1996, and the related statements of operations, stockholders' equity and cash flows for the period from July 1, 1996 (date of inception) through July 5, 1996. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements, referred to above, present fairly, in all material respects, the financial position of Walnut Capital, Inc. (a development-stage company) as of July 5, 1996, and the results of its operations, changes in its stockholders' equity and its cash flows for the period from July 1, 1996 (date of inception) through July 5, 1996 in conformity with generally accepted accounting principles. Schumacher & Associates, Inc. Certified Public Accountants 12835 E. Arapahoe Road Tower II, Suite 110 Englewood, CO 80112 July 8, 1996 F-2 WALNUT CAPITAL, INC. (A Development Stage Company) BALANCE SHEET July 5, 1996 ASSETS Current Assets: Cash $ 12,500 ----------- Total Current Assets 12,500 Organization costs 250 ----------- TOTAL ASSETS $ 12,750 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 250 ----------- Total Current Liabilities 250 TOTAL LIABILITIES 250 ----------- Stockholders' Equity: Preferred stock, $.0001 par value 5,000,000 shares authorized, none issued and outstanding -- Common stock, $.0001 par value 100,000,000 shares authorized, 1,250,000 issued and outstanding 125 Additional Paid In Capital 12,375 ----------- TOTAL STOCKHOLDERS' EQUITY 12,500 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,750 The accompanying notes are an integral part of the financial statements. F-3 WALNUT CAPITAL, INC. (A Development Stage Company) STATEMENT OF OPERATIONS For the Period from July 1, 1996 (date of inception) through July 5, 1996 Revenue $ -- ----------- Expenses $ -- ----------- Net Income (Loss) $ -- ----------- Net Income (Loss) Per Share $ -- Shares Outstanding 1,250,000 The accompanying notes are an integral part of the financial statements. F-4 WALNUT CAPITAL, INC. (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the Period from July 1, 1996 (date of inception) through July 5, 1996
Addi- tional Accumu- Preferred Stock Common Stock Paid-in lated No/Shares Amount No/Shares Amount Capital (Deficit) Total Balance at July 1, 1996 -- $ -- -- $ -- $ -- $ -- $ -- Common Stock issued for cash, at inception, at $.01 per share -- $ -- 1,250,000 $125 $12,375 $ -- $12,500 Balance at July 5, 1996 -- $ -- 1,250,000 $125 $12,375 $ -- $12,500
The accompanying notes are an integral part of the financial statements. F-5 WALNUT CAPITAL, INC. (A Development Stage Company) STATEMENT OF CASH FLOWS For the Period from July 1, 1996 (date of inception) through July 5, 1996 Cash Flows Operating Activities $ - Cash Flows from Investing Activities - Cash Flows from Financing Activities: Issuance of common stock 12,500 ---------- Net Cash Provided by Financing Activities 12,500 ---------- Increase in Cash 12,500 Cash, Beginning of Period - ---------- Cash, End of Period $ 12,500 Interest Paid $ - Income Taxes Paid $ - The accompanying notes are an integral part of the financial statements. F-6 WALNUT CAPITAL, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS July 5, 1996 (1) SUMMARY OF ACCOUNTING POLICIES. A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: (a) DESCRIPTION OF BUSINESS. Walnut Capital, Inc. (Company) was organized on July 1, 1996 for the purpose of engaging in any lawful business but it is management's plan to seek a business combination. The Company is a development-stage company since planned principal operations have not commenced. The Company has selected May 31 as its year end. (b) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (c) ORGANIZATION COSTS. Costs incurred to organize the Company are being amortized on a straight-line basis over a sixty month period. (2) COMMON STOCK ISSUED. During the period ended July 5, 1996 the Company issued 1,250,000 restricted shares of common stock for $12,500 cash. (3) RELATED PARTY TRANSACTION The Company uses the office of a shareholder at no cost. The Company expects this arrangement to continue until the Company commences planned operations. F-7 SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized. WALNUT CAPITAL, INC. By /s/ Timothy J. Brasel Date: August 28, 1996 Timothy J. Brasel, President EX-2.1 2 ARTICLES OF INCORPORATION OF WALNUT CAPITAL, INC. KNOW ALL MEN BY THESE PRESENTS: That the undersigned incorporator being a natural person of the age of twenty-one years or more and desiring to form a body corporate under the laws of the State of Nevada does hereby sign, verify and deliver in duplicate to the Secretary of State of the State of Nevada, these Articles of Incorporation: ARTICLE I NAME The name of the Corporation shall be: Walnut Capital, Inc. ARTICLE II PERIOD OF DURATION The Corporation shall exist in perpetuity, from and after the date of filing these Articles of Incorporation with the Secretary of State of the State of Nevada unless dissolved according to law. ARTICLE III PURPOSES AND POWERS 1. Purposes. Except as restricted by these Articles of Incorporation, the Corporation is organized for the purpose of transacting all lawful business for which corporations may be incorporated pursuant to the Nevada Business Corporation Act. 2. General Powers. Except as restricted by these Articles of Incorporation, the Corporation shall have and may exercise all powers and rights which a corporation may exercise legally pursuant to the Nevada Business Corporation Act. 3. Issuance of Shares. The board of directors of the Corporation may divide and issue any class of stock of the Corporation in series pursuant to a resolution properly filed with the Secretary of State of the State of Nevada. ARTICLE IV CAPITAL STOCK The aggregate number of shares which this Corporation shall have authority to issue is: One Hundred Million (100,000,000) shares of $.0001 par value each, which shares shall be designated "Common Stock"; and Five Million (5,000,000) shares of $.0001 par value each, which shares shall be designated "Preferred Stock" and which may be issued in one or more series at the discretion of the Board of Directors. The Board of Directors is hereby vested with authority to fix by resolution or resolutions the designations and the powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation the dividend rate, conversion or exchange rights, redemption price and liquidation preference, of any series of shares of Preferred Stock, and to fix the number of shares constituting any such series, and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding). In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution or resolutions originally fixing the number of shares of such series. All shares of any one series shall be alike in every particular except as otherwise provided by these Articles of Incorporation or the Nevada Business Corporation Act. No holder of any shares of the Corporation, whether now or hereafter authorized, shall have any preemptive or preferential right to acquire any shares or securities of the Corporation, including shares or securities held in the treasury of the Corporation. ARTICLE V VOTING RIGHTS; CUMULATIVE VOTING Each outstanding share of Common Stock shall be entitled to one vote and each fractional share of Common Stock shall be entitled to a corresponding fractional vote on each matter submitted to a vote of shareholders. A majority of the shares of Common Stock entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. Except as otherwise provided by these Articles of Incorporation or the Nevada Business Corporation Act, if a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders. Cumulative voting shall not be allowed in the election of directors of this Corporation. Shares of Preferred Stock shall only be entitled to such vote as is determined by the Board of Directors prior to the issuance of such stock, except as required by law, in which case each share of Preferred Stock shall be entitled to one vote. ARTICLE VI TRANSACTIONS WITH INTERESTED DIRECTORS OR OFFICERS No contract or other transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any corporation, firm or association in which one or more of its directors or officers are directors or officers or are financially interested, shall be either void or voidable solely because of such relationship or interest or solely because such director or officer is present at the meeting of the board of directors or a committee thereof which authorizes, approves, or ratifies such contract or transaction or solely because their votes are counted for such purpose, if: (a) The fact of such relationship or interest is disclosed or known to the board of directors or committee and noted in the minutes, and the board or committee authorizes, approves, or ratifies the contract or transaction in good faith by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or (b) The fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve, or ratify such contract or transaction in good faith by a majority vote or written consent. The votes of the common or interested directors or officers must be counted in any such vote of stockholders; or (c) The fact of such relationship or interest is not disclosed or known to the director or officer at the time the transaction is brought before the board of directors of the corporation for action; or (d) The contract or transaction is fair and reasonable as to the Corporation at the time it is authorized or approved. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or a committee thereof which authorizes, approves, or ratifies such contract or transaction, and if the votes of the common or interested directors are not counted at the meeting, then a majority of the disinterested directors may authorize, approve or ratify the contract or transaction. ARTICLE VII INDEMNIFICATION The Corporation is authorized to provide indemnification of its directors, officers, employees and agents; whether by bylaw, agreement, vote of shareholders or disinterested directors or otherwise, in excess of the indemnification expressly permitted by Section 78.751 of the Nevada Business Corporation Act for breach of duty to the Corporation and its shareholders, subject only to the applicable limits upon such indemnification as set forth in the Nevada Business Corporation Act. Any repeal or modification of this Article VII or Article XI shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification. ARTICLE VIII ADOPTION AND AMENDMENT OF BYLAWS The initial Bylaws of the Corporation shall be adopted by its board of directors. Subject to repeal or change by action of the shareholders, the power to alter, amend or repeal the Bylaws or adopt new Bylaws shall be vested in the board of directors. The Bylaws may contain any provisions for the regulation and management of the affairs of the Corporation not inconsistent with law or these Articles of Incorporation. ARTICLE IX RESIDENT AGENT The name of the Corporation's resident agent and the street address in Washoe County, Nevada for such resident agent where process may be served are The Corporation Trust Company of Nevada, One East First Street, Reno, Nevada 89501. The resident agent may be changed in the manner permitted by law. ARTICLE X INITIAL BOARD OF DIRECTORS The number of directors of the Corporation shall be fixed by the Bylaws of the Corporation, and the number of directors of the Corporation may be changed from time to time by consent of the Corporation's directors. The initial board of directors of the Corporation shall consist of one (1) director. The name and address of the person who shall serve as the initial director until the first annual meeting of shareholders and until his successors are elected and shall qualify are: Timothy J. Brasel 16178 East Prentice Place Aurora, Colorado 80015 ARTICLE XI LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS TO CORPORATION AND SHAREHOLDERS No director or officer shall be liable to the Corporation or any shareholder for damages for breach of fiduciary duty as a director or officer, except for any matter in respect of which such director or officer (a) shall be liable under Section 78.300 of the Nevada Business Corporation Act or any amendment thereto or successor provision thereto; or (b) shall have acted or failed to act in a manner involving intentional misconduct, fraud or a knowing violation of law. Neither the amendment nor repeal of this Article, nor the adoption of any provision in the Articles of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring prior to such amendment, repeal or adoption of an inconsistent provision. This Article shall apply to the full extent now permitted by Nevada law or as may be permitted in the future by changes or enactments in Nevada law, including without limitation Section 78.300 and/or the Nevada Business Corporation Act. ARTICLE XII INCORPORATOR The name and address of the incorporator are: Jon D. Sawyer, 1401 17th Street, Suite 460, Denver, Colorado 80202. IN WITNESS WHEREOF, the above-named incorporator has signed these Articles of Incorporation this 14th day of June, 1996. /s/ Jon D. Sawyer Jon D. Sawyer, Incorporator STATE OF COLORADO ) ) ss. COUNTY OF DENVER ) On the 14th day of June, 1996 personally appeared before me, a notary public, Jon D. Sawyer, who acknowledged before me that he executed the foregoing Articles of Incorporation. My commission expires: 7/21/98 /s/ Margaret A. Beck Notary Public 1401 17th Street, Suite 460 Denver, CO 80202 EX-2.2 3 BYLAWS OF WALNUT CAPITAL, INC. (A Nevada corporation) ARTICLE I STOCKHOLDERS 1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the corporation shall be entitled to have a certificate signed by, or in the name of, the corporation by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation or by agents designated by the Board of Directors, certifying the number of shares owned by him in the corporation and setting forth any additional statements that may be required by the General Corporation Law of Nevada. If any such certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk or by a registrar other than the corporation, a facsimile of the signature of any such officers or agents designated by the Board may be printed or lithographed upon such certificate in lieu of the actual signatures. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be such officer or officers of the corporation. Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of special stock, the certificates representing shares of any such class or series or of any such special stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares. The corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any new certificate. 2. FRACTIONAL SHARE INTERESTS. The corporation shall not be obliged to but may execute and deliver a certificate for or including a fraction of a share. In lieu of executing and delivering a certificate for a fraction of a share, the corporation may pay to any person otherwise entitled to become a holder of a fraction of a share an amount in cash specified for such purpose as the value thereof in the resolution of the Board of Directors, or other instrument pursuant to which such fractional share would otherwise be issued, or, if not specified therein, then as may be determined for such purpose by the Board of Directors of the issuing corporation; or may execute and deliver registered or bear scrip over the manual or facsimile signature of an officer of the corporation or of its agent for that purpose, exchangeable as therein provided for full share certificates, but such scrip shall not entitle the holder to any rights as a stockholder except as therein provided. Such scrip may provide that it shall become void unless the rights of the holders are exercised within a specified period and may contain any other provisions or conditions that the corporation shall deem advisable. Whenever any such scrip shall cease to be exchangeable for full share certificates, the shares that would otherwise have been issuable as therein provided shall be deemed to be treasury shares unless the scrip shall contain other provisions for their disposition. 3. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes, if any, due thereon. 4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the date on which notice is given, or, if notice is waived, at the close of business on the day next preceding the date on which the meeting is held; the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of directors is necessary, shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 5. MEANING OF CERTAIN TERMS. As used in these Bylaws in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent to dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the Articles of Incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the Articles of Incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the Articles of Corporation. 6. STOCKHOLDER MEETINGS. TIME. The annual meeting shall be held on the date and at the time fixed, from time to time, by the directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the directors. PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Nevada, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal office of the corporation in the State of Nevada. CALL. Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting. NOTICE OR WAIVER OF NOTICE. Notice of all meetings shall be in writing and signed by the President or a Vice-President, or the Secretary, or an Assistant Secretary, or by such other person or persons as the directors shall designate. Such notice shall state the purpose or purposes for which the meeting is called and the time when, and the place, where it is to be held. A copy of such notice shall be either delivered personally to, or shall be mailed postage prepaid, to each stockholder not less than ten nor more than sixty days before such meeting. If mailed, it shall be directed to a stockholder at his address as it appears upon the records of the corporation. Any stockholder may waive notice of any meeting by a writing signed by him, or his duly authorized attorney, either before or after the meeting; and whenever notice of any kind is required to be given under the provisions of the General Corporation Law, a waiver thereof in writing and duly signed whether before or after the time stated therein, shall be deemed equivalent thereto. CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a secretary of the meeting. PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy appointed by an instrument in writing in all matters in which a stockholder is entitled to participate, whether by voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be executed by the stockholder or by his attorney-in-fact. No proxy shall be valid after the expiration of six months from the date of its creation, unless coupled with an interest or unless the stockholder specifies in it therein the length of time for which it is to continue in force, which in no case shall exceed seven years from the date of its creation. INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. QUORUM. The holders of a majority of the outstanding shares of stock or of the voting power, as the case may be, shall constitute a quorum at a meeting of stockholders for the transaction of any business unless the action to be taken at the meeting shall require a different proportion. The stockholders present may adjourn the meeting despite the absence of a quorum. VOTING. Each share of stock shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law, the Articles of Incorporation, or these Bylaws prescribe a different percentage of votes and/or a different exercise of voting power. In the election of directors, voting need not be by ballot; and, except as otherwise may be provided by the General Corporation Law, voting by ballot shall not be required for any other action. 7. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as may otherwise be provided by the General Corporation Law, any action required or permitted to be taken by the vote of stockholders at a meeting, may be taken without a meeting if authorized by the written consent of stockholders holding at least a majority of the voting power; provided that if a different proportion of voting power is required for such action at a meeting, then that proportion of written consents shall be required. In no instance where action is authorized by written consent need a meeting of stockholders be called or notice given. The written consent must be filed with the minutes of the proceedings of the stockholders. Any written consent shall be subject to the requirements of Section 78.320 of the General Corporation Law and of any other applicable provision of law. ARTICLE II DIRECTORS 1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation shall be managed by the Board of Directors of the corporation. The Board of Directors shall have authority to fix the compensation of the members thereof for services in any capacity. The use of the phrase "whole Board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. Each director must be at least 18 years of age. A director need not be a stockholder or a resident of the State of Nevada. The number of directors constituting the Board of Directors shall be determined and may be increased or decreased, to not less than one director, by resolution of the Board of Directors. 3. ELECTION AND TERM. Directors may be elected in the manner prescribed by the provisions of Sections 78.320 through 78.335 of the General Corporation Law of Nevada. The first Board of Directors shall hold office until the first election of directors by stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the corporation. Thereafter, directors who are elected at an election of directors by stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next election of directors by stockholders and until their successors are elected and qualified or until their earlier resignation or removal. In the interim between elections of directors by stockholders, newly created directorships and any vacancies in the Board of Directors, including any vacancies resulting from the removal of directors for cause or without cause by the stockholders and not filled by said stockholders, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director. 4. MEETINGS. TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the director may conveniently assemble. PLACE. Meetings shall be held at such place within or without the State of Nevada as shall be fixed by the Board. CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman of the board, if any, or the President, or of a majority of the directors in office. NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice if any need not be given to a director or to any member of a committee of directors who submits a written waiver of notice signed by him before or after the time stated therein. QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as the Articles of Incorporation or these Bylaws may otherwise provide, and except as otherwise provided by the General Corporation Law, the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these Bylaws which govern a meeting of directors held to fill vacancies and newly created directorships in the Board or action of disinterested directors. Members of the Board or of any committee which may be designated by the Board may participate in a meeting of the Board or of any such committee, as the case may be, by means of a conference telephone network or a similar communications method by which all persons participating in the meeting hear each other. Participation in a meeting by said means shall constitute presence in person at any such meeting. Each person participating in a meeting by such means shall sign the minutes thereof. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any, and if present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside. 5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for cause or without cause by the holders of at least two thirds of the voting power of the outstanding stock of the corporation. One or more of the directors may be removed for cause by the Board of Directors. 6. COMMITTEES. Whenever its number consists of two or more, the Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation and each committee to have such powers and duties as the Board shall determine. Any such committee, to the extent provided in the resolution or resolutions of the Board, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal or stamp of the corporation to be affixed to all papers on which the corporation desires to place a seal or stamp. 7. WRITTEN ACTION. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if, before or after the action, a written consent thereto is signed by all the members of the Board or committee, as the case may be. The written consent must be filed with the minutes of proceedings of the Board or committee. ARTICLE III OFFICERS 1. OFFICERS. The corporation shall have a President, a Secretary, a Treasurer, a Resident Agent, and, if deemed necessary, expedient or desirable by the Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, a Chief Executive Officer, an Executive Vice-President, one or more other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers, agents and factors with such titles as the resolution choosing them shall designate. Each of any such officers, agents and factors shall be chosen by the Board of Directors or chosen in the manner determined by the Board of Directors. 2. QUALIFICATIONS. Except as may otherwise be provided in the resolution choosing him, no officer other than the Chairman of the Board, if any, and the Vice-Chairman of the Board, if any, need be a director. Any two or more offices may be held by the same person, as the directors may determine. 3. TERM OF OFFICE. Unless otherwise provided in the resolution choosing him, each officer, except the Resident Agent, shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified. The Resident Agent shall serve until his or its successor shall have been chosen and qualified. Any officer may be removed, with or without cause, by the Board of Directors or in the manner determined by the Board. Any vacancy in any office may be filled by the Board of Directors or in the manner determined by the Board. 4. DUTIES AND AUTHORITY. All officers of the corporation shall have such authority and perform such duties in the management and operation of the corporation as shall be prescribed in the resolution designating and choosing such officers and prescribing their authority and duties, and shall have such additional authority and duties as are incident to their office except to the extent that such resolutions or instruments may be inconsistent therewith. ARTICLE IV CORPORATE OPPORTUNITY The officers, directors and other members of management of this Corporation shall be subject to the doctrine of "corporate opportunities" only insofar as it applies to business opportunities in which this Corporation has expressed an interest as determined from time to time by this Corporation's board of directors as evidenced by resolutions appearing in the Corporation's minutes. Once such areas of interest are delineated, all such business opportunities within such areas of interest which come to the attention of the officers, directors, and other members of management of this Corporation shall be disclosed promptly to this Corporation and made available to it. The Board of Directors may reject any business opportunity presented to it and thereafter any officer, director or other member of management may avail himself of such opportunity. Until such time as this Corporation, through its board of directors, has designated an area of interest, the officers, directors and other members of management of this Corporation shall be free to engage in such areas of interest on their own and this doctrine shall not limit the rights of any officer, director or other member of management of this Corporation to continue a business existing prior to the time that such area of interest is designated by the Corporation. This provision shall not be construed to release any employee of this Corporation (other than an officer, director or member of management) from any duties which he may have to this Corporation. ARTICLE V PRINCIPAL AND REGISTERED OFFICES Initially, the principal office and place of business of the corporation will be located in the State of Colorado at 16178 East Prentice Place, Aurora, Colorado 80015. The Company's registered office in the State of Nevada is located at The Corporation Trust Company of Nevada, 1 East First Street, Reno, Nevada 89501. Other offices and places of business may be established from time to time by resolution of the Board of Directors or as the business of the corporation may require. The corporation shall maintain at said registered office a copy of its Articles of Incorporation, and all amendments thereto, and a copy of these Bylaws, and all amendments thereto, as certified by the Secretary of the corporation. The corporation shall also keep at said registered office a stock ledger or a duplicate stock ledger, revised annually, containing the names, alphabetically arranged, of all persons who are stockholders of the corporation, showing their places of residence, if known, and the number of shares held by them respectively or a statement setting out the name of the custodian of the stock ledger or duplicate stock ledger, and the present and complete post office address, including street and number, if any, where such stock ledger or duplicate stock ledger is maintained. ARTICLE VI CORPORATE SEAL OR STAMP The Corporate seal or stamp shall be in such form as the Board of Directors may prescribe. ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be January 1 through December 31 of each year. ARTICLE VIII CONTROL OVER BYLAWS The power to amend, alter and repeal these Bylaws and to make new Bylaws shall be vested in the Board of Directors subject to the Bylaws, if any, adopted by the stockholders. I HEREBY CERTIFY that the foregoing is a full, true and correct copy of the Bylaws of Walnut Capital, Inc., a Nevada corporation, as in effect on the date hereof. WITNESS my hand and the seal or stamp of the corporation. Dated this 1st day of July, 1996. /s/ Timothy J. Brasel (SEAL) Timothy J. Brasel, Secretary EX-3.1 4 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, /s/ James Ray Sjoerdsma ------------------------------------------- (Signature of Holder) James Ray Sjoerdsma ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 125,000 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, /s/ J. J. Peirce ------------------------------------------- (Signature of Holder) J. J. Peirce ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 100,000 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, CHARITABLE REMAINDER TRUST OF TIMOTHY J. BRASEL By/s/ Timothy J. Brasel ------------------------------------------- (Signature of Holder) Timothy J. Brasel, Trustee ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 75,000 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, CHARITABLE REMAINDER TRUST OF MARY JANE BRASEL By/s/ Timothy J. Brasel ------------------------------------------- (Signature of Holder) Timothy J. Brasel, Trustee ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 50,000 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, BRASEL FAMILY PARTNERS, LTD. By/s/ Timothy J. Brasel ------------------------------------------- (Signature of Holder) Timothy J. Brasel, General Partner ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 200,000 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, /s/ Janet M. Brasel ------------------------------------------- (Signature of Holder) Janet M. Brasel, Custodian for Tyler Jay Brasel ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 75,000 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, /s/ Janet M. Brasel ------------------------------------------- (Signature of Holder) Janet M. Brasel, Custodian for Colton R. Brasel ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 75,000 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, /s/ Janet M. Brasel ------------------------------------------- (Signature of Holder) Janet M. Brasel, Custodian for Justin Thomas Brasel ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 50,000 August 20, 1996 Board of Directors Walnut Capital, Inc. 16178 East Prentice Place Aurora, Colorado 80015 Gentlemen: The undersigned, a beneficial owner of the $.0001 par value common stock of Walnut Capital, Inc. (the "Company"), understands that the Company intends to file with the U.S. Securities and Exchange Commission a registration statement on Form 10-SB (the "Registration Statement"), for the registration of the Company's Common Stock. As part of the disclosure included in the Registration Statement, the Company has affirmatively stated that there will be no trading of the Company's securities until such time as the Company successfully implements its business plan as described in such Registration Statement, consummating a merger or acquisition. In order to insure that the aforesaid disclosure is adhered to, the undersigned agrees, for the benefit of the Company, that he/she will not offer to sell, assign, pledge, hypothecate, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock of the Company owned by him/her, or subsequently acquired through the exercise of any options, warrants or rights, or conversion of any other security or by reason of any stock split or other distribution of stock, or grant options, rights or warrants with respect to any such shares of Common Stock, until the Company successfully closes a merger or acquisition. Furthermore, the undersigned will permit all certificates evidencing his/her shares to be endorsed with the appropriate restrictive legends and will consent to the placement of appropriate stop transfer orders with the transfer agent of the Company. Furthermore, the undersigned agrees that all certificates evidencing his/her shares will be held by Jon D. Sawyer, P.C., legal counsel for the Company, who will hold the certificates until the Company has completed a merger or acquisition. Very truly yours, /s/ Paul Dragul ------------------------------------------- (Signature of Holder) Paul Dragul ------------------------------------------- Please Print Name(s) Number of Shares of Common Stock Owned: 500,000 EX-10.1 5 CONSENT OF INDEPENDENT AUDITORS Board of Directors Walnut Capital, Inc. Aurora, Colorado We hereby consent to the use in the Prospectus constituting part of the Registration Statement on Form 10-SB, and any amendments thereto, to be filed by Walnut Capital, Inc. of our Auditors' Opinion dated July 8, 1996 accompanying the Financial Statements of Walnut Capital, Inc. as of July 5, 1996, and to the use of our name under the caption "Experts" in the Prospectus. /s/ Schumacher & Associates, Inc. SCHUMACHER & ASSOCIATES, INC. Certified Public Accountants 12835 E. Arapahoe Road Tower II, Suite 110 Englewood, Colorado 80112 August 28, 1996 EX-27 6
5 This schedule contains summary financial information extracted from the balance sheet and statement of operations found on pages F-2 and F-3 of the Company's Form 10-SB for the period ended July 5, 1996, and is qualified in its entirety by reference to such financial statements. OTHER MAY-31-1997 JUL-05-1996 12,500 0 0 0 0 12,500 0 0 12,500 250 0 0 0 125 12,500 12,750 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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