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Bylaws of Prophy Research Corporation
Additions and changes to our bylaws

Additions and changes to our bylaws (stockholders agreement)

Additions and changes to our bylaws (stockholders agreement)

(These items may have been made up on the spot, or they came from annual reports, etc. They are now part of our bylaws.)



Stock Clubs

(copied this part 1-26-00 manually from 1996 Prophy report )



What and why. I set up 4 stock clubs for relatively minor stockholders. Most of you were given one share just for helping us in some indirect way. I think you will help us in the future, both with credibility and with helpful suggestions. Here are the 4 clubs I try to fit you into:




Business & Science Association, or BSA. People that helped us in professional ways.

Published Doctors, or PD. People who have written articles or books that were very educational.

(The above two clubs get stock straight from the company. This new goodwill goes into our company accounting on the Goodwill Report page, and gets added on to our total goodwill.)


Family Trust, or FT. My family members.

No Hair Stock Club, or NHSC. Friends. Great surfing skills not required.

(The above two clubs get stock straight from me. This is not counted as new goodwill.)


In a few cases someone puts in something of real value, like paying some of our expenses, or investing cash. These shares are called hard asset shares.


Total shares owned by clubs                             1996

Club                 Goodwill stock Hard asset stock           Total shares

BSA                             462                              8                                  470

PD                               37                                0                                  37

FT                                1294                            20                                1314

NHSC                         241                              3                                  244

Total                            2034                            31                                2065


How to put people into clubs. Regular stockholders may give stock to people that help them, etc. Just do it, and tell me about it.


How the stock clubs work. Each club is one owner for most stockholder purposes. This is like when a company owns shares in behalf of its company people. There will probably be times when the club members are not given quite the full consideration of regular stockholders. The most important time is when news breaks. I will not tell everyone everything that happens. In some cases I might have the club president (which is me for now) act in behalf of the club. For example, if there was good news when some people would like to buy stock, the president could buy and hold some shares. These shares would be spit amongst the club members, according to number of shares, that put in a buy order once they did get the news. It is fine to own hard asset shares (ie, shares bought with real money) within your club. Generally speaking, club members are welcome to become regular stockholders if they wish.


Club president. Members will elect a president, one vote per share, following the pattern in the regular company elections. If you would like to run, please let me know (see ballot). The president will handle all the stockholder duties now performed by the company/CEO. The president will do things like buy and sell stock on behalf of the members, mail reports to members, and collect ballots from members.


What if you were given a share and do not want it? Please mark Give your share back on the ballot post card. This cancels the original gift and it is easy in every way.







Til death do us part

(Added to website version 12-17-04)


When you die, your shares are gradually given back to the company. The same thing happens if we lose contact and you become a lost shareholder.


Basically, the stock plan gives us a vehicle to participate and contribute, hoping mainly to see proper F nutrition advance, and, if it becomes a viable business, to have the ownership be equitable. An estate would probably just want to liquidate holdings that in a true business sense still have little or no value. (At least in our pre-revenue days.)  We do not want our estates to pull the company apart just to get a few nickels. (We would almost surely have to have a major devaluation if a big owner had to sell all stock holdings.) If us big shareholders want to pass some shares to other family and friends, etc, we should do that as we go along, or tell me that is what you want to happen, or own the shares together, or make some specific provision in a will at least. If nobody says anything, we will just do-dee-do move along. I will probably not make any effort to contact your heirs, especially for one stupid share. If your heirs come knocking I will most likely just take them at their word that they inherited your shares.


With lost shareholders and lost heirs, if we lose contact (mostly my fault for not mailing something once a year), we may re-give the shares (or some part) if you come back into contact and it is not a million-dollar payoff. The current CEO can decide that at the time.


Schedule after no-contact (usually =  a mailing returned, no fwd address) or date of death:


1 year later lose 50% of orig holdings (rounded to even shares)

2 year later lose 30 %

3 year later lose remaining 20%

(Example, you own 10 shares, and a mailing Jan 1, 2005 comes back unfowardable. Jan 1, 2006, you own 5 shares. Jan 1, 2007, you own 2. Jan 1, 2008, you own zippo.)




Dissolving the corporation

(Added to website version 12-17-04)



When Mary and Pua sold Kapuakea, each stockholder had to sign a unanimous agreement to dissolve the corporation. Medium hassle. We should make it clear that the CEOs vast powers also include dissolution. Ideally there would be a mailing that said we were dissolved, but it is OK to just fade away. If we are down to our last few hundred dollars, let us not spend them on postage to say we are broke.


I also added a few bits about real estate and patents authorizing the CEO to do our business.


Here is how that part of the original stockholders agreement will now read:





This agreement may be changed at any time by a simple majority of shares. However, the worst the changes can be will be to the statutory minimum (standard bylaws). Changes do not have to be recorded here in any special way. Most changes would just be noted in the next stockholders report or posted on our website.




I consent to this stockholders agreement. I fully realize that there are several provisions that give me less rights than a standard stockholders agreement, and they are listed below. I specifically agree to these provisions, in consideration for the other benefits of our agreement.


1.  To dispense with a required annual stockholders meeting. We may or may not have a stockholders meeting, but it is not required, nor is it required to get my permission each year not to have the meeting.


2.  To dispense with a required annual stockholders election, as above.


3.  To empower the CEO to perform all duties normally performed by a board of directors, specifically:


declaring dividends or other distributions,

making recommendations to stockholders,

nominating and appointing corporate officers,

amending bylaws,

approving a plan of merger,

dissolving the corporation,

selling the remainder of the companys start-up stock shares, and any other issues authorized by a majority of shares,

buying and selling the CEOs personal stock,

functioning as a stock market for our shares,

and in general having the power to set values on just about everything we each put into or take out of the company.


4. To empower the CEO to perform all duties normally performed by an individual landowner or patent owner, specifically:


selling, leasing, and/or renting our land,

signing deeds, leases, etc. in behalf of our corporation

signing mortgages and otherwise borrowing money in behalf of our corporation

licensing or selling our patents, trademarks, and / or other intellectual property






Takeover situations

(Added to website version 12-20-04)


Our main business model is to license the patent once we get it. However, we should bear in mind that we are a small fish swimming in a sea of big fish pharmaceutical companies. They may look at other options to use our invention:

Infringement / fight the patent (long and expensive, but we will eventually win);

Buy the patent (I guess we would at least look at this)

Buy us (lets look at this option quickly)


Our total valuation of the company is only about $310K. That is less than many licensing agreements cost to even get started. It would make sense for them to just buy the company and transfer the patent to their ownership. I am a little rusty on acquisitions, but lets look at what it would probably mean for a small stockholder.


My understanding is that these offers are usually some combo of cash and stock. If it is just cash, no probs. We just divvy it up per share. If there is stock involved, there may be a wee bit of shafting of small stockholders. I think they tend to just offer stock to the top few of our shareholders, and then just cash to the hoi polloi. The shafting comes in when they make the stock extra sweet, like at a big discount to the street price. So even though we all get the same price for our shares, us big shareholders also get a premium in that we are getting $50 shares for $30 or something. I am aware of this, and will try to minimize it, but I am not promising to equalize all the inequalities if it is otherwise a deal we like.


(In the original bylaws I rail against deals like this, Not only do minority shares get shafted for the entire course of the company, but when a company with this system [normal stock plans, as opposed to ours] is sold, it is common to give one price for the majority shares and a lower price for the minority shares.)


I am not particularly interested in a buyout, but there are advantages, especially for our big stockholders like the Drs. Glenn and Peebles. They have helped this company for 15 years or whatever its been, never asking for a nickel. Just recently they have had their houses ripped into by hurricanes (Miami, Port Charlotte), so now would not be a bad time for a little cash infusion.

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