U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities
Exchange Act of 1934
BUFFALO CAPITAL IV, LTD.
(Name of Small Business Issuer in its charter)
Colorado 84-1356427
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7331 S. Meadow Court,
Boulder, Colorado 80301
(Address of Principal Office) Zip Code
Issuer's telephone number: (303) 530-3353
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered - N/A
Name of each exchange on which each class is to be
registered - N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
Class A Warrants to purchase common stock
(Title of class)
Class B Warrants to purchase common stock
(Title of class)<PAGE>
PART I -
Item 1. DESCRIPTION OF BUSINESS
General
The Company was incorporated under the laws of the State of
Colorado on August 28, 1996, and is in the early developmental and
promotional stages. To date the Company's only activities have been
organizational ones, directed at developing its business plan and raising its
initial capital. The Company has not commenced any commercial
operations. The Company has no full-time employees and owns no real
estate.
The Company has elected to file this Form 10-SB/A registration
statement on a voluntary basis in order to become a reporting company
under the Securities Exchange Act of 1934. The Company is a "blind pool"
or "blank check" company, whose business plan is to seek, investigate, and,
if warranted, acquire one or more properties or businesses, and to pursue
other related activities intended to enhance shareholder value. The
acquisition of a business opportunity may be made by purchase, merger,
exchange of stock, or otherwise, and may encompass assets or a business
entity, such as a corporation, joint venture, or partnership. The Company
has very limited capital, and it is unlikely that the Company will be able to
take advantage of more than one such business opportunity. The Company
intends to seek opportunities demonstrating the potential of long-term growth
as opposed to short-term earnings.
At the present time the Company has not identified any business
opportunity that it plans to pursue, nor has the Company reached any
agreement or definitive understanding with any person concerning an
acquisition. The Company's officers, directors and non-management
principal shareholders named herein, have previously been involved in
several transactions involving mergers between an established company and
a blind pool or blank check entity, and they have numerous contacts within
the field of corporate finance (See Item 5 "Directors, Executive Officers,
Promoters and Control Persons - Other Blind Pool Activities"). As a result,
they have had preliminary contacts with representatives of numerous
companies concerning the general possibility of a merger or acquisition with
a blind pool or blank check company. However, none of these preliminary
contacts or discussions involved the possibility of a merger or acquisition
transaction with the Company.
Prior to the effective date of this registration statement, it is
anticipated that the Company's officers, directors, and non-management
principal shareholders named herein will contact broker-dealers and other
persons with whom they are acquainted who are involved in corporate
finance matters to advise them of the Company's existence and to determine
if any companies or businesses they represent have a general interest in
considering a merger or acquisition with a blind pool or blank check entity.
No direct discussions regarding the possibility of a merger with the
Company are expected to occur until after the effective date of this
registration statement. However, no assurance can be given that the
Company will be successful in finding or acquiring a desirable business
opportunity, given the limited funds that are expected to be available for
acquisitions, or that any acquisition that occurs will be on terms that are
favorable to the Company or its stockholders.
The Company's search will be directed toward small and
medium-sized enterprises which have a desire to become public corporations
and which are able to satisfy, or anticipate in the reasonably near future
being able to satisfy, the minimum asset requirements in order to qualify
shares for trading on NASDAQ (See "Investigation and Selection of
Business Opportunities"). The Company anticipates that the business
opportunities presented to it will (i) either be in the process of formation or,
be recently organized with limited operating history, or a history of losses
attributable to under-capitalization or other factors; (ii) be experiencing
financial or operating difficulties; (iii) be in need of funds to develop a new
product or service or to expand into a new market; (iv) be relying upon an
untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv). The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued or that it believes may realize a substantial benefit from
being publicly owned. Given the above factors, investors should expect that
any acquisition candidate may have little or no operating history, or a history
of losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural
resources, manufacturing, high technology, product development, medical,
communications and others. The Company's discretion in the selection of
business opportunities is unrestricted, subject to the availability of such
opportunities, economic conditions, and other factors.
As a consequence of this registration of its securities, any entity
which has an interest in being acquired by, or merging into the Company,
is expected to be an entity that desires to become a public company and
establish a public trading market for its securities. In connection with such
a merger or acquisition, it is highly likely that an amount of stock
constituting control of the Company would be issued by the Company or
purchased from the current principal shareholders of the Company by the
acquiring entity or its affiliates. If stock is purchased from the current
shareholders, the transaction is very likely to be a private transaction rather
than a public distribution of securities, but is also likely to result in
substantial gains to them relative to their purchase price for such stock.
In the Company's judgment, none of its officers and directors would thereby
become an "underwriter" within the meaning of the Section 2(11) of the
Securities Act of 1933, as amended as long as the transaction is a private
transaction rather than a public distribution of securities. The sale of a
controlling interest by certain principal shareholders of the Company could
occur at a time when the other shareholders of the Company remain subject
to restrictions on the transfer of their shares.
Depending upon the nature of the transaction, the current officers and
directors of the Company may resign their management positions with the
Company in connection with a change in control of the Company or its
acquisition of a business opportunity (See "Form of Acquisition," below, and
"Risk Factors - The Company - Lack of Continuity in Management"). In the
event of such a resignation, the Company's current management would not
have any control over the conduct of the Company's business following the
change in control or the Company's combination with a business
opportunity.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officers and
directors, its other stockholders, professional advisors such as attorneys and
accountants, securities broker-dealers, venture capitalists, members of the
financial community, and others who may present unsolicited proposals.
The Company has no plans, understandings, agreements, or commitments
with any individual for such person to act as a finder of opportunities for the
Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future,
contrary to the foregoing expectations, that a transaction with an affiliate
would be in the best interests of the Company and its stockholders, the
Company is in general permitted by Colorado law to enter into such a
transaction if:
(1) The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are known to
the Board of Directors, and the Board in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors constitute less than a
quorum; or
(2) The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Company as of the
time it is authorized, approved or ratified, by the Board of Directors or the
stockholders.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the
other company's management and personnel, the anticipated acceptability of
new products or marketing concepts, the merit of technological changes, the
perceived benefit the company will derive from becoming a publicly held
entity, and numerous other factors which are difficult, if not impossible, to
analyze through the application of any objective criteria. In many instances,
it is anticipated that the historical operations of a specific business
opportunity may not necessarily be indicative of the potential for the future
because of the possible need to shift marketing approaches substantially,
expand significantly, change product emphasis, change or substantially
augment management, or make other changes. The Company will be
dependent upon the owners of a business opportunity to identify any such
problems which may exist and to implement, or be primarily responsible for
the implementation of, required changes. Because the Company may
participate in a business opportunity with a newly organized firm or with a
firm which is entering a new phase of growth, the Company will incur fur-
ther risks, because management in many instances will not have proved its
abilities or effectiveness, the eventual market for such company's products
or services will likely not be established, and the company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify, but
will essentially be limited to one such venture because of the Company's
limited financing. This lack of diversification will not permit the Company
to offset potential losses from one business opportunity against profits from
another, and should be considered an adverse factor affecting any decision
to purchase the Company's securities.
It is emphasized that management of the Company may effect
transactions having a potentially adverse impact upon the Company's
shareholders pursuant to the authority and discretion of the Company's
management to complete acquisitions without submitting any proposal to the
stockholders for their consideration. Holders of the Company's securities
should not anticipate that the Company necessarily will furnish such holders,
prior to any merger or acquisition, with financial statements, or any other
documentation, concerning a target company or its business. In some
instances, however, the proposed participation in a business opportunity may
be submitted to the stockholders for their consideration, either voluntarily by
such directors to seek the stockholders' advice and consent or because state
law so requires.
The analysis of business opportunities will be undertaken by or under
the supervision of the Company's officers, directors and non-management
principal shareholders, none of whom are professional business analysts (See
"Management"). Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the investigation
and selection of business opportunities, and might pay a finder's fee. Since
Company management has no current plans to use any outside consultants
or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such
consultants or advisors, the criteria to be used in selecting such consultants
or advisors, the services to be provided, the term of service, or regarding the
total amount of fees that may be paid. However, because of the limited
resources of the Company, it is likely that any such fee the Company agrees
to pay would be paid in stock and not in cash. Otherwise, the Company
anticipates that it will consider, among other things, the following factors:
(1) Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
(2) The Company's perception of how any particular business
opportunity will be received by the investment community and by the
Company's stockholders;
(3) Whether, following the business combination, the financial
condition of the business opportunity would be, or would have a significant
prospect in the foreseeable future of becoming sufficient to enable the
securities of the Company to qualify for listing on an exchange or on a
national automated securities quotation system, such as NASDAQ, so as to
permit the trading of such securities to be exempt from the requirements of
Rule 15c2-6 adopted by the Securities and Exchange Commission (See "Risk
Factors - The Company - Regulation of Penny Stocks").
(4) Capital requirements and anticipated availability of required
funds, to be provided by the Company or from operations, through the sale
of additional securities, through joint ventures or similar arrangements, or
from other sources;
(5) The extent to which the business opportunity can be advanced;
(6) Competitive position as compared to other companies of similar
size and experience within the industry segment as well as within the
industry as a whole;
(7) Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
(8) The cost of participation by the Company as compared to the
perceived tangible and intangible values and potential; and
(9) The accessibility of required management expertise, personnel,
raw materials, services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would
qualify for listing on NASDAQ, the current standards include the require-
ments that the issuer of the securities that are sought to be listed have gross
assets of at least $4,000,000 and net assets of at least $2,000,000, and the
NASD has made a proposal to increase the requirements to $6,000,000 of
gross assets and $3,000,000 of net assets. Many, and perhaps most, of the
business opportunities that might be potential candidates for a combination
with the Company would not satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the
selection of a business opportunity, and management will attempt to analyze
all factors appropriate to each opportunity and make a determination based
upon reasonable investigative measures and available data. Potentially
available business opportunities may occur in many different industries and
at various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities
extremely difficult and complex. Potential investors must recognize that,
because of the Company's limited capital available for investigation and
management's limited experience in business analysis, the Company may not
discover or adequately evaluate adverse facts about the opportunity to be
acquired.
The Company is unable to predict when it may participate in a
business opportunity. It expects, however, that the analysis of specific
proposals and the selection of a business opportunity may take several
months or more.
Prior to making a decision to participate in a business opportunity,
the Company will generally request that it be provided with written materials
regarding the business opportunity containing such items as a description of
products, services and company history; management resumes; financial
information; available projections, with related assumptions upon which they
are based; an explanation of proprietary products and services; evidence of
existing patents, trademarks, or services marks, or rights thereto; present and
proposed forms of compensation to management; a description of
transactions between such company and its affiliates during relevant periods;
a description of present and required facilities; an analysis of risks and
competitive conditions; a financial plan of operation and estimated capital
requirements; audited financial statements, or if they are not available,
unaudited financial statements, together with reasonable assurances that
audited financial statements would be able to be produced within a
reasonable period of time not to exceed 60 days following completion of a
merger transaction; and other information deemed relevant.
As part of the Company's investigation, the Company's executive
officers and directors may meet personally with management and key
personnel, may visit and inspect material facilities, obtain independent
analysis or verification of certain information provided, check references of
management and key personnel, and take other reasonable investigative
measures, to the extent of the Company's limited financial resources and
management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact
of Securities and Exchange Commission regulations regarding purchase and
sale of "penny stocks." The regulations would affect, and possibly impair,
any market that might develop in the Company's securities until such time
as they qualify for listing on NASDAQ or on another exchange which would
make them exempt from applicability of the "penny stock" regulations. See
"Risk Factors - Regulation of Penny Stocks."
Company management believes that various types of potential merger
or acquisition candidates might find a business combination with the
Company to be attractive. These include acquisition candidates desiring to
create a public market for their shares in order to enhance liquidity for
current shareholders, acquisition candidates which have long-term plans for
raising capital through the public sale of securities and believe that the
possible prior existence of a public market for their securities would be
beneficial, and acquisition candidates which plan to acquire additional assets
through issuance of securities rather than for cash, and believe that the
possibility of development of a public market for their securities will be of
assistance in that process. Acquisition candidates which have a need for an
immediate cash infusion are not likely to find a potential business
combination with the Company to be an attractive alternative.
Form of Acquisition
It is impossible to predict the manner in which the Company may
participate in a business opportunity. Specific business opportunities will be
reviewed as well as the respective needs and desires of the Company and the
promoters of the opportunity and, upon the basis of that review and the
relative negotiating strength of the Company and such promoters, the legal
structure or method deemed by management to be suitable will be selected.
Such structure may include, but is not limited to leases, purchase and sale
agreements, licenses, joint ventures and other contractual arrangements. The
Company may act directly or indirectly through an interest in a partnership,
corporation or other form of organization. Implementing such structure may
require the merger, consolidation or reorganization of the Company with
other corporations or forms of business organization. In addition, the present
management and stockholders of the Company most likely will not have
control of a majority of the voting shares of the Company following a
merger or reorganization transaction. As part of such a transaction, the
Company's existing directors may resign and new directors may be
appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of Common Stock or other
securities of the Company. Although the terms of any such transaction
cannot be predicted, it should be noted that in certain circumstances the
criteria for determining whether or not an acquisition is a so-called "tax free"
reorganization under the Internal Revenue Code of 1986, depends upon the
issuance to the stockholders of the acquired company of a controlling
interest (i.e. 80% or more) of the common stock of the combined entities
immediately following the reorganization. If a transaction were structured
to take advantage of these provisions rather than other "tax free" provisions
provided under the Internal Revenue Code, the Company's current
stockholders would retain in the aggregate 20% or less of the total issued
and outstanding shares. This could result in substantial additional dilution
in the equity of those who were stockholders of the Company prior to such
reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current officers, directors and principal
shareholders. (See "Description of Business - General").
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some cir-
cumstances, however, as a negotiated element of the transaction, the
Company may agree to register such securities either at the time the
transaction is consummated, or under certain conditions or at specified times
thereafter. The issuance of substantial additional securities and their
potential sale into any trading market that might develop in the Company's
securities may have a depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of
such agreement cannot be predicted, generally such an agreement would
require specific representations and warranties by all of the parties thereto,
specify certain events of default, detail the terms of closing and the
conditions which must be satisfied by each of the parties thereto prior to
such closing, outline the manner of bearing costs if the transaction is not
closed, set forth remedies upon default, and include miscellaneous other
terms.
As a general matter, the Company anticipates that it, and/or its
principal shareholders will enter into a letter of intent with the management,
principals or owners of a prospective business opportunity prior to signing
a binding agreement. Such a letter of intent will set forth the terms of the
proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any
of the other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to participate in
a specific business opportunity, the costs theretofore incurred in the related
investigation would not be recoverable. Moreover, because many providers
of goods and services require compensation at the time or soon after the
goods and services are provided, the inability of the Company to pay until
an indeterminate future time may make it impossible to procure goods and
services.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by pur-
chasing, trading or selling the securities of such business. The Company
does not, however, intend to engage primarily in such activities.
Specifically, the Company intends to conduct its activities so as to avoid
being classified as an "investment company" under the Investment Company
Act of 1940 (the "Investment Act"), and therefore to avoid application of the
costly and restrictive registration and other provisions of the Investment Act,
and the regulations promulgated thereunder.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment company
securities. Since the Company will not register as an investment company,
stockholders will not be afforded these protections.
Any securities which the Company might acquire in exchange for its
Common Stock will be "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the "Act"). If the Company elects to
resell such securities, such sale cannot proceed unless a registration statement
has been declared effective by the Securities and Exchange Commission or
an exemption from registration is available. Section 4(1) of the Act, which
exempts sales of securities not involving a public distribution by persons
other than the issuer, would in all likelihood be available to permit a private
sale. Although the plan of operation does not contemplate resale of
securities acquired, if such a sale were to be necessary, the Company would
be required to comply with the provisions of the Act to effect such resale.
An acquisition made by the Company may be in an industry which
is regulated or licensed by federal, state or local authorities. Compliance
with such regulations can be expected to be a time-consuming and expensive
process.
Competition
The Company expects to encounter substantial competition in its
efforts to locate attractive opportunities, primarily from business
development companies, venture capital partnerships and corporations,
venture capital affiliates of large industrial and financial companies, small
investment companies, and wealthy individuals. Many of these entities will
have significantly greater experience, resources and managerial capabilities
than the Company and will therefore be in a better position than the
Company to obtain access to attractive business opportunities. The Company
also will experience competition from other public "blind pool" companies,
many of which may have more funds available than does the Company.
Administrative Offices
The Company currently maintains a mailing address at 7331 S.
Meadow Court, Boulder, Colorado 80301, which is the office address of its
President. The Company's telephone number there is (303) 530-3353.
Other than this mailing address, the Company does not currently maintain
any other office facilities, and does not anticipate the need for maintaining
office facilities at any time in the foreseeable future. The Company pays no
rent or other fees for the use of this mailing address.
Employees
The Company is a development stage company and currently has no
employees. Management of the Company expects to use consultants,
attorneys and accountants as necessary, and does not anticipate a need to
engage any full-time employees so long as it is seeking and evaluating
business opportunities. The need for employees and their availability will
be addressed in connection with the decision whether or not to acquire or
participate in specific business opportunities.
Risk Factors
A. Conflicts of Interest. Certain conflicts of interest exist
between the Company and its officers and directors. They have other
business interests to which they currently devote attention, and may be
expected to continue to do so although management time should be devoted
to the business of the Company. As a result, conflicts of interest may arise
that can be resolved only through their exercise of judgment in a manner
which is consistent with their fiduciary duties to the Company. See
"Management," and "Conflicts of Interest."
In particular, the Company's officers and directors have formed three
other blind pool or blank check companies with a structure and a business
plan which is identical to that of the Company, and may, in the future, form
additional blind pool or blank check companies with a business plan similar
or identical to that of the Company. The three other blind pool or blank
check companies which were formed at the same time as the Company and
have an identical structure and business plan do not currently create a
conflict of interest with the Company because they have the same
shareholders. However, any such additional blind pool or blank check
companies formed in the future, which do not have the same capital structure
and shareholders as the Company, would also be in direct competition with
the Company for available business opportunities (See Item 5 - "Directors,
Executive Officers, Promoters and Control Persons - Conflicts of Interest").
It is anticipated that the Company's principal shareholders may
actively negotiate or otherwise consent to the purchase of a portion of their
common stock as a condition to, or in connection with, a proposed merger
or acquisition transaction. In this process, the Company's principal
shareholders may consider their own personal pecuniary benefit rather than
the best interests of other Company shareholders, and the other Company
shareholders are not expected to be afforded the opportunity to approve or
consent to any particular stock buy-out transaction. See "Conflicts of
Interest."
B. Possible Need for Additional Financing. The Company has
very limited funds, and such funds may not be adequate to take advantage
of any available business opportunities. Even if the Company's funds prove
to be sufficient to acquire an interest in, or complete a transaction with, a
business opportunity, the Company may not have enough capital to exploit
the opportunity. The ultimate success of the Company may depend upon its
ability to raise additional capital. The Company has not investigated the
availability, source, or terms that might govern the acquisition of additional
capital and will not do so until it determines a need for additional financing.
If additional capital is needed, there is no assurance that funds will be
available from any source or, if available, that they can be obtained on terms
acceptable to the Company. If not available, the Company's operations will
be limited to those that can be financed with its modest capital.
C. Regulation of Penny Stocks. The Company's securities,
when available for trading, will be subject to a Securities and Exchange
Commission rule that imposes special sales practice requirements upon
broker-dealers who sell such securities to persons other than established
customers or accredited investors. For purposes of the rule, the phrase
"accredited investors" means, in general terms, institutions with assets in
excess of $5,000,000, or individuals having a net worth in excess of
$1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions
covered by the rule, the broker-dealer must make a special suitability
determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefor.
In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stocks." Such rules include Rules 3a51-
1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and 15g-7 under the Securities
Exchange Act of 1934, as amended. Because the securities of the Company
may constitute "penny stocks" within the meaning of the rules, the rules
would apply to the Company and to its securities. The rules may further
affect the ability of owners of Shares to sell the securities of the Company
in any market that might develop for them.
Shareholders should be aware that, according to Securities and
Exchange Commission Release No. 34-29093, the market for penny stocks
has suffered in recent years from patterns of fraud and abuse. Such patterns
include (i) control of the market for the security by one or a few broker-
dealers that are often related to the promoter or issuer; (ii) manipulation of
prices through prearranged matching of purchases and sales and false and
misleading press releases; (iii) "boiler room" practices involving high-
pressure sales tactics and unrealistic price projections by inexperienced sales
persons; (iv) excessive and undisclosed bid-ask differentials and markups by
selling broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a
desired level, along with the resulting inevitable collapse of those prices and
with consequent investor losses. The Company's management is aware of
the abuses that have occurred historically in the penny stock market.
Although the Company does not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to the Company's
securities.
D. No Operating History. The Company was formed in August
of 1996 for the purpose of registering its common stock under the 1934 Act
and acquiring a business opportunity. The Company has no operating
history, revenues from operations, or assets other than cash from private
sales of stock. The Company faces all of the risks of a new business and the
special risks inherent in the investigation, acquisition, or involvement in a
new business opportunity. The Company must be regarded as a new or
"start-up" venture with all of the unforeseen costs, expenses, problems, and
difficulties to which such ventures are subject.
E. No Assurance of Success or Profitability. There is no
assurance that the Company will acquire a favorable business opportunity.
Even if the Company should become involved in a business opportunity,
there is no assurance that it will generate revenues or profits, or that the
market price of the Company's Common Stock will be increased thereby.
F. Possible Business - Not Identified and Highly Risky. The
Company has not identified and has no commitments to enter into or acquire
a specific business opportunity and therefore can disclose the risks and
hazards of a business or opportunity that it may enter into in only a general
manner, and cannot disclose the risks and hazards of any specific business
or opportunity that it may enter into. An investor can expect a potential
business opportunity to be quite risky. The Company's acquisition of or
participation in a business opportunity will likely be highly illiquid and
could result in a total loss to the Company and its stockholders if the
business or opportunity proves to be unsuccessful. See Item 1 "Description
of Business."
G. Type of Business Acquired. The type of business to be
acquired may be one that desires to avoid effecting its own public offering
and the accompanying expense, delays, uncertainties, and federal and state
requirements which purport to protect investors. Because of the Company's
limited capital, it is more likely than not that any acquisition by the
Company will involve other parties whose primary interest is the acquisition
of control of a publicly traded company. Moreover, any business
opportunity acquired may be currently unprofitable or present other negative
factors.
H. Impracticability of Exhaustive Investigation. The Company's
limited funds and the lack of full-time management will likely make it
impracticable to conduct a complete and exhaustive investigation and
analysis of a business opportunity before the Company commits its capital
or other resources thereto. Management decisions, therefore, will likely be
made without detailed feasibility studies, independent analysis, market
surveys and the like which, if the Company had more funds available to it,
would be desirable. The Company will be particularly dependent in making
decisions upon information provided by the promoter, owner, sponsor, or
others associated with the business opportunity seeking the Company's
participation. A significant portion of the Company's available funds may
be expended for investigative expenses and other expenses related to
preliminary aspects of completing an acquisition transaction, whether or not
any business opportunity investigated is eventually acquired.
I. Lack of Diversification. Because of the limited financial
resources that the Company has, it is unlikely that the Company will be able
to diversify its acquisitions or operations. The Company's probable inability
to diversify its activities into more than one area will subject the Company
to economic fluctuations within a particular business or industry and
therefore increase the risks associated with the Company's operations.
J. Possible Reliance upon Unaudited Financial Statements. The
Company generally will require audited financial statements from companies
that it proposes to acquire. No assurance can be given, however, that
audited financials will be available to the Company. In cases where audited
financials are unavailable, the Company will have to rely upon unaudited
information received from target companies' management that has not been
verified by outside auditors. The lack of the type of independent verification
which audited financial statements would provide, increases the risk that the
Company, in evaluating an acquisition with such a target company, will not
have the benefit of full and accurate information about the financial
condition and operating history of the target company. This risk increases
the prospect that the acquisition of such a company might prove to be an
unfavorable one for the Company or the holders of the Company's securities.
Moreover, the Company will be subject to the reporting provisions
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and thus will be required to furnish certain information about significant
acquisitions, including audited financial statements for any business that it
acquires. Consequently, acquisition prospects that do not have, or are unable
to provide reasonable assurances that they will be able to obtain, the required
audited statements would not be considered by the Company to be
appropriate for acquisition so long as the reporting requirements of the
Exchange Act are applicable. Should the Company, during the time it
remains subject to the reporting provisions of the Exchange Act, complete
an acquisition of an entity for which audited financial statements prove to
be unobtainable, the Company would be exposed to enforcement actions by
the Securities and Exchange Commission (the "Commission") and to
corresponding administrative sanctions, including permanent injunctions
against the Company and its management. The legal and other costs of
defending a Commission enforcement action are likely to have material,
adverse consequences for the Company and its business. The imposition of
administrative sanctions would subject the Company to further adverse
consequences.
In addition, the lack of audited financial statements would prevent
the securities of the Company from becoming eligible for listing on
NASDAQ, the automated quotation system sponsored by the National
Association of Securities Dealers, Inc., or on any existing stock exchange.
Moreover, the lack of such financial statements is likely to discourage
broker-dealers from becoming or continuing to serve as market makers in the
securities of the Company. Without audited financial statements, the
Company would almost certainly be unable to offer securities under a
registration statement pursuant to the Securities Act of 1933, and the ability
of the Company to raise capital would be significantly limited until such
financial statements were to become available.
K. Other Regulation. An acquisition made by the Company may
be of a business that is subject to regulation or licensing by federal, state,
or local authorities. Compliance with such regulations and licensing can be
expected to be a time-consuming, expensive process and may limit other
investment opportunities of the Company.
L. Dependence upon Management; Limited Participation of
Management. The Company will be heavily dependent upon the skills,
talents, and abilities of its officers and directors to implement its business
plan, and may, from time to time, find that the inability of such persons to
devote their full time attention to the business of the Company results in a
delay in progress toward implementing its business plan. Furthermore, the
Company will be entirely dependent upon the experience of its officers and
directors in seeking, investigating, and acquiring a business and in making
decisions regarding the Company's operations. See "Management." Because
investors will not be able to evaluate the merits of possible business
acquisitions by the Company, they should critically assess the information
concerning the Company's officers and directors.
M. Lack of Continuity in Management. The Company does not
have an employment agreement with any of its sole officers or directors, and
as a result, there is no assurance that they will continue to manage the
Company in the future. In connection with acquisition of a business
opportunity, it is likely the current officers and directors of the Company
may resign. A decision to resign will be based upon the identity of the
business opportunity and the nature of the transaction, and is likely to occur
without the vote or consent of the stockholders of the Company.
N. Indemnification of Officers and Directors. The Company's
Articles of Incorporation provide for the indemnification of its directors,
officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to
which they become a party arising from their association with or activities
on behalf of the Company. The Company will also bear the expenses of
such litigation for any of its directors, officers, employees, or agents, upon
such person's promise to repay the Company therefor if it is ultimately
determined that any such person shall not have been entitled to
indemnification. This indemnification policy could result in substantial
expenditures by the Company which it will be unable to recoup.
O. Director's Liability Limited. The Company's Articles of
Incorporation exclude personal liability of its directors to the Company and
its stockholders for monetary damages for breach of fiduciary duty except
in certain specified circumstances. Accordingly, the Company will have a
much more limited right of action against its directors than otherwise would
be the case. This provision does not affect the liability of any director under
federal or applicable state securities laws.
P. Dependence upon Outside Advisors. To supplement the
business experience of its officers and directors, the Company may be
required to employ accountants, technical experts, appraisers, attorneys, or
other consultants or advisors. The selection of any such advisors will be
made by the Company's officers without any input from stockholders.
Furthermore, it is anticipated that such persons may be engaged on an "as
needed" basis without a continuing fiduciary or other obligation to the
Company. In the event the officers of the Company consider it necessary
to hire outside advisors, they may elect to hire persons who are affiliates, if
they are able to provide the required services.
Q. Leveraged Transactions. There is a possibility that any
acquisition of a business opportunity by the Company may be leveraged, i.e.,
the Company may finance the acquisition of the business opportunity by
borrowing against the assets of the business opportunity to be acquired, or
against the projected future revenues or profits of the business opportunity.
This could increase the Company's exposure to larger losses. A business
opportunity acquired through a leveraged transaction is profitable only if it
generates enough revenues to cover the related debt and expenses. Failure
to make payments on the debt incurred to purchase the business opportunity
could result in the loss of a portion or all of the assets acquired. There is
no assurance that any business opportunity acquired through a leveraged
transaction will generate sufficient revenues to cover the related debt and
expenses.
R. Competition. The search for potentially profitable business
opportunities is intensely competitive. The Company expects to be at a
disadvantage when competing with many firms that have substantially
greater financial and management resources and capabilities than the
Company. These competitive conditions will exist in any industry in which
the Company may become interested.
S. No Foreseeable Dividends. The Company has not paid di-
vidends on its Common Stock and does not anticipate paying such dividends
in the foreseeable future.
T. Loss of Control by Present Management and Stockholders.
The Company may consider an acquisition in which the Company would is-
sue as consideration for the business opportunity to be acquired an amount
of the Company's authorized but unissued Common Stock that would, upon
issuance, represent the great majority of the voting power and equity of the
Company. The result of such an acquisition would be that the acquired
company's stockholders and management would control the Company, and
the Company's management could be replaced by persons unknown at this
time. Such a merger would result in a greatly reduced percentage of
ownership of the Company by its current shareholders. In addition, the
Company's President could sell his control block of stock at a premium
price to the acquired company's stockholders.
U. No Public Market Exists. There is no public market for the
Company's common stock, and no assurance can be given that a market will
develop or that a shareholder ever will be able to liquidate his investment
without considerable delay, if at all. If a market should develop, the price
may be highly volatile. Factors such as those discussed in this "Risk
Factors" section may have a significant impact upon the market price of the
securities offered hereby. Owing to the low price of the securities, many
brokerage firms may not be willing to effect transactions in the securities.
Even if a purchaser finds a broker willing to effect a transaction in these
securities, the combination of brokerage commissions, state transfer taxes,
if any, and any other selling costs may exceed the selling price. Further,
many lending institutions will not permit the use of such securities as
collateral for any loans.
V. Rule 144 Sales. All of the outstanding shares of Common
Stock held by present stockholders are "restricted securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other
applicable exemptions from registration under the Act and as required under
applicable state securities laws. Rule 144 provides in essence that a person
who has held restricted securities for a prescribed period may, under certain
conditions, sell every three months, in brokerage transactions, a number of
shares that does not exceed the greater of 1.0% of a company's outstanding
common stock or the average weekly trading volume during the four
calendar weeks prior to the sale. There is no limit on the amount of
restricted securities that may be sold by a nonaffiliate after the restricted
securities have been held by the owner for a period of three years. A sale
under Rule 144 or under any other exemption from the Act, if available, or
pursuant to subsequent registrations of shares of Common Stock of present
stockholders, may have a depressive effect upon the price of the Common
Stock in any market that may develop. Of the total 135,000 shares of
common stock held by present stockholders of the Company, 120,000 shares
will become available for resale under Rule 144 ninety (90) days after the
Company registers its common stock under Section 12(g) of the Securities
and Exchange Commission, and the remaining 15,000 shares will become
available for resale starting in August, 1997.
W. Market Overhang of Warrants. There are a total of 4,830,000
Class A Warrants outstanding. Subject to prior cancellation, each Class A
Warrant is exercisable for one share of Common Stock during the period
beginning January 1, 1997, and ending December 31, 2002 (unless
extended). Each Class A Warrant carries an exercise price of $2.00. There
are a total of 2,415,000 Class B Warrants outstanding. Subject to prior
cancellation, each Class B Warrant is exercisable for one share of Common
Stock during the period beginning January 1, 1997, and ending December
31, 2002 (unless extended). Each Class B Warrant carries an exercise price
of $4.00. Exercise of the Warrants can be expected to have an adverse
effect upon the trading price of and market for the Common Stock, if any
such market develops. Even if a public market for the Common Stock
should develop, it is not possible to predict whether normal market forces
might cause an increase in the bid price of the Common Stock to the level
of the exercise price of either the Class A or the Class B Warrants. It is
possible that so long as any of the Warrants remain outstanding, their exis-
tence will prevent a rise in the price of the Common Stock higher than their
exercise price. See "Description of Securities - Class A Warrants." Sale or
transfer of the Warrants is subject to the Company's filing of and obtaining
effectiveness for a registration statement with appropriate federal and state
securities agencies. See "Possible Cancellation of Class A Warrants without
Notice," below, for further risks related to the market for Class A Warrants.
X. Exercise of Warrants Uncertain. Because of the lack of a market
for the Warrants and the uncertainty of the Company's potential for success,
the Warrants may not be exercised before they expire, with the result that
no proceeds from exercise of the Warrants would be received by the
Company. The Warrants may be exercised only at a time when a current
registration statement is in effect and only if the shares are qualified for
sale under applicable securities laws of the states in which the various
warrantholders reside. Although the Company intends to use its best efforts
to keep a registration statement current during the exercise periods of the
Warrants, and when justified by market conditions, there is no assurance that
it will do so or that it will be financially able to do so. Further, it is not
required to do so at any time when the market bid price for the Common
Stock is less than the exercise price of the Warrants. Proceeds from the
exercise of Warrants may be subject to the escrow requirements of the
Colorado Securities Act. See "Use of Proceeds."
Y. Possible Cancellation of Warrants without Notice. The Company
is entitled to cancel the Warrants without prior notice to the warrantholders
should the representatives of a business opportunity with which the Company
wishes to combine require, as a condition to consummation of the
combination, that the Warrants be canceled. Under these circumstances, the
warrantholders will have no opportunity to exercise the purchase rights under
the Warrants. See "Description of Securities - Class A and Class B
Warrants." The Company's ability to cancel the Warrants without notice
may cause them to be of little value, may inhibit or prevent the formation
of a separate trading market for the Warrants, and may have a substantial,
depressive effect upon the trading price of the Warrants should such a
separate market come into being.
Z. Blue Sky Considerations. Because the securities registered
hereunder have not been registered for resale under the blue sky laws of any
state, the holders of such shares and persons who desire to purchase them in
any trading market that might develop in the future, should be aware that
there may be significant state blue-sky law restrictions upon the ability of
investors to sell the securities and of purchasers to purchase the securities.
Some jurisdictions may not under any circumstances allow the trading or
resale of blind-pool or "blank-check" securities. Accordingly, investors
should consider the secondary market for the Company's securities to be a
limited one.
Item 2. Management's Discussion and Analysis or Plan of Operations.
Liquidity and Capital Resources
The Company remains in the development stage and, since inception,
has experienced no significant change in liquidity or capital resources or
stockholder's equity other than the receipt of proceeds in the amount of
$7,500 from its inside capitalization funds. Consequently, the Company's
balance sheet for the period of August 28, 1996 (inception) through May 31,
1997, reflects a current asset value of $3,731 and a total asset value of
$3,986, primarily in the form of cash.
The Company will carry out its plan of business as discussed above.
The Company cannot predict to what extent its liquidity and capital
resources will be diminished prior to the consummation of a business
combination or whether its capital will be further depleted by the operating
losses (if any) of the business entity which the Company may eventually
acquire.
Results of Operations
During the period from August 28, 1996 (inception) through May 31,
1997, the Company has engaged in no significant operations other than
organizational activities, acquisition of capital and preparation for
registration of its securities under the Securities Exchange Act of 1934, as
amended. No revenues were received by the Company during this period.
For the current fiscal year, the Company anticipates incurring a loss
as a result of organizational expenses, expenses associated with registration
under the Securities Exchange Act of 1934, and expenses associated with
locating and evaluating acquisition candidates. The Company anticipates
that until a business combination is completed with an acquisition candidate,
it will not generate revenues other than interest income, and may continue
to operate at a loss after completing a business combination, depending upon
the performance of the acquired business.
Need for Additional Financing
The Company believes that its existing capital will be sufficient to
meet the Company's cash needs, including the costs of compliance with the
continuing reporting requirements of the Securities Exchange Act of 1934,
as amended, for a period of approximately one year. Accordingly, in the
event the Company is able to complete a business combination during this
period, it anticipates that its existing capital will be sufficient to allow it
to accomplish the goal of completing a business combination. There is no
assurance, however, that the available funds will ultimately prove to be
adequate to allow it to complete a business combination, and once a business
combination is completed, the Company's needs for additional financing are
likely to increase substantially.
No commitments to provide additional funds have been made by
management or other stockholders, and the Company has no plans,
proposals, arrangements or understandings with respect to the sale or
issuance of additional securities prior to the location of a merger or
acquisition candidate. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses. In the event the Company does elect to raise additional capital
prior to location of a merger or acquisition candidate, it expect to do so
through the private placement of restricted securities rather than through a
public offering. The Company does not currently contemplate making a
Regulation S offering.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company might
seek to compensate providers of services by issuances of stock in lieu of
cash. For information as to the Company's policy in regard to payment for
consulting services, see "Certain Relationships and Transactions."
Item 3. Description of Property.
The Company currently maintains a mailing address at 7331 S.
Meadow Court, Boulder, Colorado 80301, which is the address of its
President. The Company pays no rent for the use of this mailing address,
however, for financial statement purposes, the Company is accruing $50 per
month as additional paid-in capital for this use. The Company does not
believe that it will need to maintain an office at any time in the foreseeable
future in order to carry out its plan of operations described herein. The
Company's telephone number is (303) 530-3353.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of the date of this Registration
Statement, the number of shares of Common Stock owned of record and
beneficially by executive officers, directors and persons who hold 5% or
more of the outstanding Common Stock of the Company. Also included are
the shares held by all executive officers and directors as a group.
<TABLE>
<CAPTION>
%
of
Number of Shares Class
Name and address Owned Beneficially Owned
<S> <C> <C>
Grant W. Peck <F1>
7331 S. Meadow Court
Boulder, Colorado 80301 30,000<F2> 22.22%
Dean F. Sessions<F1>
P. O. Box 17881
Boulder, Colorado 80308 30,000<F2> 22.22%
Scott B. Olson
6025 S. Quebec Street, # 340
Englewood, Colorado 80111 30,000<F2> 22.22%
Gary S. Joiner
4750 Table Mesa Drive
Boulder, Colorado 80303 30,000<F2> 22.22%
All directors and executive
officers (2 persons) 60,000 44.44%
<FN>
<F1> The person listed is an officer, a director, or both, of the Company.
<F2> Does not include 1,200,000 shares subject to Class A Warrants owned
by each such person exercisable at $2.00 per share beginning January 1,
1997, or 600,000 shares subject to Class B Warrants owned by each such
person exercisable at $4.00 per share beginning January 1, 1997.
</FN>
</TABLE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers currently serving the Company are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Positions Held and Tenure
Grant W. Peck 42 President and a Director since January, 1995
Dean F. Sessions 46 Secretary, Treasurer, and a Director since
January, 1995/August, 1997
</TABLE>
The directors named above will serve until the first annual meeting
of the Company's stockholders. Thereafter, directors will be elected for
one-year terms at the annual stockholders' meeting. Officers will hold their
positions at the pleasure of the board of directors, absent any employment
agreement, of which none currently exists or is contemplated. There is no
arrangement or understanding between any of the directors or officers of the
Company and any other person pursuant to which any director or officer was
or is to be selected as a director or officer, and there is no arrangement, plan
or understanding as to whether non-management shareholders will exercise
their voting rights to continue to elect the current directors to the Company's
board. There are also no arrangements, agreements or understandings
between non-management shareholders and management under which non-
management shareholders may directly or indirectly participate in or
influence the management of the Company's affairs.
The directors and officers will devote their time to the Company's
affairs on an "as needed" basis, which, depending on the circumstances,
could amount to as little as two hours per month, or more than forty hours
per month, but more than likely will fall within the range of five to ten
hours per month. There are no agreements or understandings for any officer
or director to resign at the request of another person, and none of the
officers or directors are acting on behalf of, or will act at the direction of ,
any other person.
Biographical Information
Grant W. Peck.
Mr. Peck has served as President and a Director of the Company
since its inception.
Mr. Peck was the principal shareholder, the President and a Director
of J. S. Grant's, Inc., doing business as Just Squeezed Juices, from its
inception in 1985 until January, 1995, when the Company was sold. J.S.
Grant's distributed fresh juices from Denver, Colorado, to five states, and
had approximately $3.5 million in annual sales and 36 employees. Between
1977 and 1984, Mr. Peck was an owner and Director of Operations for the
Harvest Restaurant and Bakery, a restaurant company that catered to the then
emerging health-conscious market. During his tenure with Harvest
Restaurant and Bakery, Mr. Peck was responsible for the growth and daily
operation of the restaurant company, employing over 385 employees and
staffing 28 managers.
Mr. Peck has been the President and a director of Buffalo Capital I,
Ltd., Buffalo Capital II, Ltd., and Buffalo Capital III, Ltd, all of which are
Colorado corporations, since their inception in August, 1996. All of these
entities are in the same business as the Company (blind pool or public shell
companies). In June 1997, the principal shareholders of Buffalo Capital I,
Ltd. sold control of the company and in conjunction with the change in
control, Mr. Peck, as well as the other officers and directors of that company
resigned. For further information about these other entities, see "Other Blind
Pool Activities").
Mr. Peck attended the University of Colorado and Macalester College
in St. Paul, Minnesota, but did not receive a degree from either institution.
In 1990 Mr. Peck personally filed for the protection of the federal
bankruptcy laws as a result of the temporary inability of his company, J. S.
Grant's, Inc., to pay him a salary or otherwise arrange to pay debts Mr. Peck
had incurred to capitalize such company.
Dean F. Sessions.
Mr. Sessions has served as Secretary and Treasurer, and as a Director
of the Company since its inception.
From 1973 through 1982 Mr. Sessions was employed as an
investment broker by E. F. Hutton & Co., in its Boulder, Colorado office.
From 1982 through 1986 Mr. Sessions was an officer, director and principal
shareholder of A. S. Food Company, Inc., a Colorado corporation formed to
acquire the franchise rights for Round The Corner restaurants in Oregon,
Washington and British Columbia. A. S. Food Company, Inc., opened and
operated two Round The Corner restaurants in the Seattle, Washington area,
but in 1986 it filed bankruptcy and ceased operations. As a result of the
failure of the business of A. S. Food Company, Inc., Mr. Sessions also filed
a personal bankruptcy petition in 1986.
In October 1986, Mr. Sessions renewed his securities license with the
NASD and simultaneously joined the Boulder, Colorado office of E. F.
Hutton as an account executive. From June of 1987 through March of 1988,
Mr. Sessions was a registered representative of L. T. Securities, the
securities division of Lincoln Trust Corporation of Denver, Colorado. From
March, 1988, to August, 1990, Mr. Sessions was a registered representative
with Cohig Securities, Inc. of Denver, Colorado, and from January, 1991 to
June, 1994, Mr. Sessions was a registered representative with Walford and
Company, of Boulder, Colorado. In addition, from August, 1990, to the
present, Mr. Sessions has been actively engaged in attempting to acquire his
Professional Golf Association (PGA) tour card.
Mr. Sessions has been the Secretary, Treasurer, and a director of
Buffalo Capital I, Ltd., Buffalo Capital II, Ltd., and Buffalo Capital III,
Ltd., all of which are Colorado corporations, since their inception in August,
1996. All of these entities are in the same business as the Company (blind
pool or public shell companies). In June 1997, the principal shareholders of
Buffalo Capital I, Ltd. sold control of the company and in conjunction with
the change in control, Mr. Sessions, as well as the other officers and
directors of that company resigned. For further information about these
other entities see "Other Blind Pool Activities."
Mr. Sessions has a B.S. degree from the University of Colorado.
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of In-
corporation provide that the Company will indemnify its directors and
officers against expenses and liabilities they incur to defend, settle, or
satisfy any civil or criminal action brought against them on account of their
being or having been Company directors or officers unless, in any such action,
they are adjudged to have acted with gross negligence or willful misconduct.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been
informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
Exclusion of Liability
Pursuant to the Colorado Business Corporation Act, the Company's
Articles of Incorporation exclude personal liability for its directors for
monetary damages based upon any violation of their fiduciary duties as
directors, except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, acts in violation of Section 7-106-401 of the
Colorado Business Corporation Act, or any transaction from which a director
receives an improper personal benefit. This exclusion of liability does not
limit any right which a director may have to be indemnified and does not
affect any director's liability under federal or applicable state securities
laws.
Other Blind Pool Activities
Each of the Company's executive officers, directors, and principal
shareholders holds an identical officer, director and/or shareholder position
with two other companies, Buffalo Capital II, Ltd. and Buffalo Capital III,
Ltd., both of which are Colorado corporations. The Company and each of
these other entities will be in competition with each other for prospective
companies to acquire. See "Conflicts of Interest" below.
In addition, the Company's officers, directors and principal
shareholders have been affiliated in the past with other blind pool
companies. Such other companies and such affiliations are set forth in this
section below.
Messrs. Joiner, Peck, and Sessions were founders and officers and
directors of two blind pool companies established in 1993, Dakota Equities,
Ltd. ("Dakota"), and Cumberland Capital Corporation ("Cumberland"), and
were founders and officers and directors of three blind pool companies
established in 1995, Alchemy Equities, Ltd. ("Alchemy"), Chelmsford
Capital, Ltd. ("Chelmsford"), and Global Capital Access Corporation
("Global"), and were founders of one other blind pool company established
in 1996, Buffalo Capital I, Ltd. ("Buffalo I").
Dakota filed a registration statement under the Securities Exchange
Act of 1934, which became effective on or about January 24, 1994. On
December 14, 1994, the controlling shareholders of Dakota sold stock
representing approximately 87.5% of the outstanding shares to California
Brokerage Services, Inc., for an aggregate purchase price of $60,000.00.
Thereafter, on or about February 1, 1995, Dakota completed a merger
transaction with Sel-Drum International, Inc., which, through its wholly
owned subsidiaries Sel-Drum Corp (Canada), Sel-Drum Corporation
(U.S.A.), Inc., and Micron Imaging Technologies, is engaged in the
distribution of copier photoreceptors, high mortality parts for copy machines,
and copier accessories. The shares of Sel-Drum (formerly Dakota Equities),
trade in the over the counter market on the NASD Bulletin Board.
On or about October 8, 1993, Cumberland filed a registration
statement under the Securities Act of 1933. The registration statement was
subsequently withdrawn, and until its investment in Alchemy, Chelmsford
and Global, Cumberland did not engage in any business activities.
Cumberland Capital subsequently sold its interests in Alchemy, Chelmsford
and Global, and is not currently engaged in any business operations.
Alchemy filed a registration statement under the Securities Exchange
Act of 1934, on April 3, 1995, which became effective on or about June 2,
1995. On January 15, 1996, the controlling shareholders of Alchemy sold
stock representing approximately 74.69% of the outstanding shares to
California Brokerage Services, Inc., for an aggregate purchase price of
$25,000, and all of the existing officers and directors resigned and
nominated replacements designated by the purchaser. Thereafter, on or
about March 6, 1996, Alchemy completed a merger transaction with
Heritage Mines, Ltd., which is engaged in the mining business in Northern
California. The shares of Heritage Mines, Ltd (formerly Alchemy), trade in
the over the counter market on the NASD Bulletin Board.
Chelmsford filed a registration statement under the Securities
Exchange Act of 1934, on April 6, 1995, which became effective on or
about June 6, 1995. On November 6, 1996, the controlling shareholders of
Chelmsford sold stock representing approximately 86.86% of the outstanding
shares to Capital Twain, Inc., a Nevada corporation, for an aggregate
purchase price of $70,000, and all of the existing officers and directors
resigned and nominated replacements designated by the purchaser.
Chelmsford has not completed a merger transaction, and there is not
currently a public market for its shares.
Global filed a registration statement under the Securities Exchange
Act of 1934, on April 11, 1995, which became effective on or about June
12, 1995. On July 12, 1996, the controlling shareholders of Global sold
stock representing approximately 71.03% of the outstanding shares to The
Rally Group, Ltd., for an aggregate purchase price of $30,000, and all of the
existing officers and directors resigned and nominated replacements
designated by the purchaser. Thereafter, Global changed its name to
Controlled Environment Aquaculture Technology, Inc. ("CEA Tech"), and
commenced activities related to intensive land-based aquaculture, including
acquisition of all of the outstanding stock of Aquacare Environment, Inc.,
a Washington corporation. There is not currently a public market for the
shares of CEA Tech (formerly Global).
Buffalo I filed a registration statement under the Securities Exchange Act of
1934 on January 9, 1997, which became effective on or about March 10,
1997. On June 25, 1997, Buffalo I acquired all of the issued and
outstanding stock of Multiple Dimensional Laser Technologies, Inc., a
Nevada corporation ("MDLT Nevada"), in exchange for the issuance of
4,800,000 shares of common stock. As part of that transaction, Buffalo I
also changed its name to Multiple Dimensional Laser Technologies, Inc., and
cancelled all previously issued and outstanding Class A and Class B
Warrants. In conjunction with this transaction, Wilmington Capital, LLC,
an investment consulting firm representing MDLT Nevada, agreed to pay the
principal shareholders of Buffalo I a consulting fee of $75,000. There is not
currently a public trading market for the shares of Multiple Dimensional
Laser Technologies, Inc. (formerly Buffalo I).
The officers and directors of the Company may establish additional blind
pools in the future.
See "Conflicts of Interest."
Conflicts of Interest
None of the officers of the Company will devote more than a portion
of his time to the affairs of the Company. There will be occasions when the
time requirements of the Company's business conflict with the demands of
the officers' other business and investment activities. Such conflicts may
require that the Company attempt to employ additional personnel. There is
no assurance that the services of such persons will be available or that they
can be obtained upon terms favorable to the Company.
Each of the Company's officers and directors also are officers,
directors, or both of three other Boulder, Colorado based development-stage
corporations in the same business as the Company. See "Other Blind Pool
Activities." These three companies will be in direct competition for
available opportunities.
When a business opportunity comes to the attention of any of the
Company's officers or directors, he intends to inform the other officers and
directors of the Company, and together, they will determine which blind
pool or public shell company will have the first option to consider an
acquisition of the particular target. It is presently anticipated that the
officers and directors will pursue a policy whereby the opportunity will be
presented to the public company that has had its securities registered
pursuant to Section 12(g) of the 1934 Act for the longest period of time. In
the event that none of the pool is more mature than the others, the officers
and directors will arbitrarily assign the particular business opportunity to one
of the pool companies. Potential investors should expect that, because of the
policy that will be employed by the Company's officers and directors as set
forth above, whereby more "mature" pool companies will have business
opportunities presented to them first, the Company and its shareholders may
have to wait a significant amount of time before an appropriate business
opportunity for the Company is identified.
Members of management have a fiduciary obligation to the
stockholders of the Company as well as to the stockholders of other
companies with which they are affiliated. Should a business opportunity that
would be appropriate for consideration by the Company arise and be
presented by an officer or director of the Company to another company with
which one of them is affiliated, and not be presented to the Company, then
any one or all of them may be unable to satisfy his fiduciary obligation to
the Company's stockholders. Notwithstanding the foregoing, however, as
of the date of this registration statement, the Company and the three other
blind-pool companies described herein, have the same shareholders. It is
also anticipated that all such companies will continue to have the same
shareholders until such time as a public market, if any, develops for their
shares. Since a public market is not expected to develop for the shares of
the Company, or for either of the other three blind-pool companies, until
they have completed the acquisition of a business opportunity, the possibility
of claims by a shareholder of the Company, or of one of the other entities,
alleging breach of fiduciary duty by the officers and directors, is
substantially reduced or eliminated.
Company management intends to actively negotiate or otherwise
consent to the purchase of a portion of their common stock as a condition
to, or in connection with, a proposed merger or acquisition transaction.
Members of management acquired their shares for services rendered at a
price of $0.50 per share, and the total purchase price for all presently issued
and outstanding shares was $67,500, of which $7,500 was paid in cash and
$60,000 was paid in the form of performance of services. It is anticipated
that a substantial premium may be paid by the purchaser in conjunction with
any sale of shares by members of Company management which is made as
a condition to, or in connection with, a proposed merger or acquisition
transaction. The fact that a substantial premium may be paid to members
of Company management to acquire their shares creates a conflict of interest
for them and may compromise their state law fiduciary duties to the
Company's other shareholders. In making any such sale, members of
Company management may consider their own personal pecuniary benefit
rather than the best interests of the Company and the Company's other
shareholders, and the other shareholders are not expected to be afforded the
opportunity to approve or consent to any particular buy-out transaction
involving shares held by members of Company management.
Item 6. Executive Compensation.
At inception of the Company each Director received 600,000 shares
of Common Stock valued at $.0001 per share which were issued for services
rendered to the Company in investigating and developing the Company's
business plan and for agreeing to be a Director. Two other principal
shareholders of the Company each received 600,000 shares of Common
Stock, valued at $.0001 per share, for consulting services provided to the
Company. No officer or director has received any other remuneration. A
portion of these shares which were issued for services were subsequently
cancelled and the book value of the remaining shares issued for services was
changed to $0.50 per share (See Item 7 - Certain Relationships and Related
Transactions). Until the Company acquires additional capital, it is not
intended that any officer or director will receive compensation from the
Company other than reimbursement for out-of-pocket expenses incurred on
behalf of the Company. See "Certain Relationships and Related
Transactions." The Company has no stock option, retirement, pension, or
profit-sharing programs for the benefit of directors, officers or other
employees, but the Board of Directors may recommend adoption of one or
more such programs in the future.
The Company may employ a spouse of an officer or director, or an
employee of a company owned by an officer or director, to perform
administrative or secretarial services required by the Company. Such
individuals would be paid standard, "going rate" hourly compensation for
services rendered.
The Company has employed the law firm of Frascona, Joiner &
Goodman, P.C., in which one of its principal shareholders, Gary S. Joiner,
is a shareholder, to provide legal services in connection with registration of
the Company's shares. It may also employ the same law firm to provide
legal services in connection with the acquisition of a business. Mr. Joiner
and any other members of his firm, if employed, would be paid their normal
hourly rate for legal services provided.
Item 7. Certain Relationships and Related Transactions.
On August 28, 1996, the Company issued to its officers, directors,
and principal shareholders a total of 2,400,000 shares of Common Stock,
Class A Warrants to purchase 4,800,000 additional shares of Common Stock
at $2.00 per share, and Class B Warrants to purchase 2,400,000 additional
shares of Common Stock at $4.00 per share for services valued at $240.00,
or $0.0001 per share. On August 30, 1996, the Company issued 15,000
shares of Common Stock, Class A Warrants to purchase 30,000 additional
shares of Common Stock at $2.00 per share, and 15,000 Class B Warrants
to purchase additional shares of Common Stock at $4.00 per share, for a
total of $7,500 in cash or $0.50 per share (without allocating any of the
consideration to the Warrants). On May 31, 1997, the Company's officers,
directors and non-management principal shareholders each voluntarily
surrendered for cancellation 570,000 shares (or an aggregate total of
2,280,000 shares. In addition, as of that date, the Company revised the book
value of the 30,000 shares which each such individual retained, to $0.50 per
share. This change in book value was made in order to establish a book
value for the shares issued for services equal to the cash purchase price paid
for shares by the other shareholders of the Company. Certificates evidencing
the Common Stock, Class A Warrants and Class B Warrants issued by the
Company to these persons have all been stamped with a restrictive legend,
and are subject to stop transfer orders by the Company. For additional
information concerning restrictions that are imposed upon the securities held
by current stockholders, and the responsibilities of such stockholders to
comply with federal securities laws in the disposition of such Common
Stock, see "Risk Factors - Rule 144 Sales."
No officer, director, promoter, or affiliate of the Company has or
proposes to have any direct or indirect material interest in any asset proposed
to be acquired by the Company through security holdings, contracts, options,
or otherwise.
The Company has adopted a policy under which any consulting or
finder's fee that may be paid to a third party for consulting services to assist
management in evaluating a prospective business opportunity would be paid
in stock or in cash. Any such issuance of stock would be made on an ad
hoc basis. Accordingly, the Company is unable to predict whether or in
what amount such a stock issuance might be made.
It is not currently anticipated that any salary, consulting fee, or
finder's fee shall be paid to any of the Company's directors or executive
officers, or to any other affiliate of the Company except as described under
"Executive Compensation" above.
The Company maintains its offices at the residence of its President,
for which it pays no rent, and for which it does not anticipate paying rent
in the future. The Company anticipates that following the consummation of
a business combination with an acquisition candidate, the Company's office
will be moved, but cannot predict future office or facility arrangements with
officers, directors or affiliates of the Company.
Although management has no current plans to cause the Company
to do so, it is possible that the Company may enter into an agreement with
an acquisition candidate requiring the sale of all or a portion of the Common
Stock or Warrants held by the Company's current stockholders to the
acquisition candidate or principals thereof, or to other individuals or business
entities, or requiring some other form of payment to the Company's current
stockholders, or requiring the future employment of specified officers and
payment of salaries to them. It is more likely than not that any sale of
securities by the Company's current stockholders to an acquisition candidate
would be at a price substantially higher than that originally paid by such
stockholders. Any payment to current stockholders in the context of an
acquisition involving the Company would be determined entirely by the
largely unforeseeable terms of a future agreement with an unidentified
business entity.
Item 8. Description of Securities.
Common Stock
The Company's Articles of Incorporation authorize the issuance of
100,000,000 shares of Common Stock. Each record holder of Common
Stock is entitled to one vote for each share held on all matters properly
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 have no preemptive, conversion or redemptive rights. All of the
issued and 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 then existing stockholders
may be diluted.
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of
10,000,000 shares of preferred stock. 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. No preferred stock has been issued by
the Company. The Company anticipates that preferred stock may be utilized
in making acquisitions.
Warrants
A total of 4,830,000 Class A Warrants have been issued to the
Company's current shareholders exercisable to purchase a like number of
Common Shares at $2.00 each. A total of 2,415,000 Class B Warrants have
been issued to the Company's current shareholders exercisable to purchase
a like number of Common Shares at $4.00 each. The Class A Warrants and
Class B Warrants are referred to herein collectively as the "Warrants." The
Class A and B Warrants are in registered form and are issued pursuant to a
Warrant Agent Agreement between the Company and a Warrant Agent. As
of the date hereof, the Company is serving as its own Warrant Agent.
However, it is anticipated that following completion of a merger transaction,
and prior to the existence of any public trading market in the Company's
shares, an independent Warrant Agent will be designated. The information
presented below is only a summary of that agreement and is qualified in its
entirety by the provisions of the agreement itself.
Exercise Price and Periods. Subject to the current Registration
Statement requirement described below, each Warrant entitles the holder to
purchase one share of Common Stock, during the period commencing
January 1, 1997 and terminating December 31, 2002, at a price of $2.00 per
share for the Class A Warrants and $4.00 per share for the Class B
Warrants. The expiration date of the Warrants (and the period during which
the Warrants are exercisable) may be extended indefinitely, or the exercise
price thereof reduced, at the discretion of the Company, upon giving five (5)
days' prior notice to the Warrant Agent and giving subsequent notice thereof
to warrantholders.
Manner of Exercise. Warrants may be exercised by surrender of the
Warrants to the Warrant Agent with appropriate instructions accompanied by
payment of the full purchase price for the Common Stock underlying each
Warrant being exercised. Payment of the purchase price must be made in
United States funds payable to the Company. The Warrants and payment
therewith must reach the Warrant Agent on or before the expiration date (or
the earlier cancellation date, as provided in the next paragraph) of the
Warrants.
Cancellation of the Warrants. The Warrants shall be subject to
cancellation by the Company as follows:
(a) Subject to the limitations set forth below in this subparagraph
(a), all, but not fewer than all, of each class of Warrants may be canceled
by the Company at any time prior to the declaration by the Securities and
Exchange Commission of the effectiveness of a registration statement
relating to the underlying Common Stock, without prior written notice to the
registered holders of such class of Warrants and without any right on the
part of the holders of the Warrants to exercise their purchase rights. Upon
cancellation, the right of the warrantholder to purchase the Common Stock
underlying the Warrants will be extinguished. Because the Warrants may be
exercised only so long as a registration statement shall have been declared
effective by the Commission and remains current, a cancellation of either
class of Warrants pursuant to this subparagraph (a) will mean that the
warrantholder shall never have received an opportunity to exercise the War-
rants following the acquisition of a business opportunity by the Company.
The Company's right to cancel the Warrants in accordance with this
subparagraph (a) may be exercised, however, only in the event that manage-
ment of a business opportunity that is the target of a business combination
with the Company shall have required, in writing, that the cancellation of the
Warrants shall be a condition precedent to the consummation of the business
combination between the Company and the target company. The
cancellation is to become effective only upon the closing of such a business
combination. Should the contemplated business combination fail to close,
the cancellation shall be void and the exercisability of the Warrants covered
by the cancellation shall not be affected. The failure of one or more
business combinations to close shall not, however, impair the Company's
right to cancel either class of Warrants under this subparagraph (a) if the
Company enters into arrangements for a subsequent business combination
featuring the warrant-cancellation condition described above in this subpara-
graph (a). To the extent that the management of a business opportunity that
consummates a business combination with the Company does not require
cancellation of Warrants as a condition of closing, the right of the Company
to cancel the Warrants as described in this subparagraph (a) shall be
extinguished.
(b) In addition to the cancellation mechanism described in
subparagraph (a), above, all or any number of either class of Warrants may
be canceled by the Company at any time during their exercise term upon a
minimum of thirty (30) days' prior written notice mailed to the registered
holders of such Warrants, subject to the right of the holders of such
Warrants to exercise their purchase rights between the date of any notice of
cancellation up to and including the cancellation date given by the Company.
See, however, "Limitations upon Exercise," below. The notice period may
be extended, at the discretion of the Company, upon giving subsequent
notice to the Warrant Agent and to registered holders of the Warrants. Any
holder who does not exercise his Warrants prior to the date set for
cancellation will forfeit his right to purchase the Common Stock underlying
the Warrants being canceled.
Limitations upon Exercise. Warrants may not be exercised unless the
Company maintains a current Registration Statement in effect for the
Common Stock issuable upon exercise of the Warrants, during the exercise
period of the Warrants in question. The Company will have no obligation,
however, to file or to keep the Registration Statement current with respect
to either class of Warrants when there is no current public market for the
Company's shares or when the market bid price for the Company's Common
Stock is below the exercise price of the Warrants in question. The Common
Stock issuable upon the exercise of the Warrants cannot be sold in various
states without qualifying the Common Stock under state law and the
Company may find it impractical or impossible so to qualify the Common
Stock in certain states. Warrantholders who are residents of states in which
the Company does not qualify the Common Stock underlying the Warrants
for sale will have no choice but either to sell their Warrants or to let them
expire.
Rights of Warrantholders. Holders of the Warrants will have no
voting rights, and will not be entitled to dividends. In the event of
liquidation, dissolution or winding up of the affairs of the Company, holders
of the Warrants will not be entitled to participate in any liquidation
distribution. Holders of Warrants are protected against dilution of their
interests represented by the underlying shares of Common Stock upon the
occurrence of stock dividends, stock splits or reclassifications of the
Company's Common Stock.
Effect of Warrants. For the life of the Warrants, warrantholders have
the opportunity to profit from a rise in the market value of the Common
Stock of the Company, if any, at the expense of the Common Stock holders.
A warrantholder may be expected to exercise Warrants at a time when the
Company, in all likelihood, would be able to obtain equity capital, if it so
desires, by a public sale of a new Common Stock offering on terms more
favorable than those provided in the Warrants. Exercise of the Warrants will
dilute the equity interest of other stockholders in the Company.
Transfer and Warrant Agent
As of the date hereof, the Company is serving as its own Transfer
Agent and Warrant Agent.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual report
for each fiscal year ending August 31 containing financial statements audited
by its independent certified public accountants. In the event the Company
enters into a business combination with another company, it is the present
intention of management to continue furnishing annual reports to
stockholders. Additionally, the Company may, in its sole discretion, issue
unaudited quarterly or other interim reports to its stockholders when it deems
appropriate. The Company intends to comply with the periodic reporting
requirements of the Securities Exchange Act of 1934.
PART II
Item 1. Market Price and Dividends on the Registrant's Common Equity
and Other Shareholder Matters
No public trading market exists for the Company's securities and all
of its outstanding securities are restricted securities as defined in Rule 144.
There were seven (7) holders of record of the Company's common stock on
May 31, 1997. No dividends have been paid to date and the Company's
Board of Directors does not anticipate paying dividends in the foreseeable
future.
Item 2. Legal Proceedings
The Company is not a party to any pending legal proceedings, and
no such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of
record or beneficial owner of more than 5.0% of the securities of the
Company, or any associate of any such director, officer or security holder
is a party adverse to the Company or has a material interest adverse to the
Company in reference to pending litigation.
Item 3. Changes in and Disagreements with Accountants.
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
Since August 28, 1996 (the date of the Company's formation), the
Company has sold its Common Stock to the persons listed in the table below
in transactions summarized as follows:
<TABLE>
<CAPTION>
Purchase
Name Date of Shares Aggregate Price
Sale Purchase Price per Share
<S> <C> <C> <C> <C>
Gary S. Joiner 08/28/96 30,000<F1> 15,000.00<F2> 0.50<F3>
Grant W. Peck 08/28/96 30,000<F1> 15,000.00<F2> 0.50<F3>
Dean F. Sessions 08/28/96 30,000<F1> 15,000.00<F2> 0.50<F3>
Scott B. Olson 08/28/96 30,000<F1> 15,000.00<F2> 0.50<F3>
John H. Stearns 08/30/96 5,000<F1> 2,500.00 0.50<F3>
Richard Stearns 08/30/96 5,000<F1> 2,500.00 0.50<F3>
Frank & Janet
Jackson 08/30/96 5,000<F1> 2,500.00 0.50<F3>
<FN>
<F1> Sold in units each comprised of one share of common stock,
two Class A Warrants and one Class B Warrant. Originally received
600,000 units, which included 600,000 shares valued at $0.0001 per
share. On or about May 31, 1997, a total of 570,000 of such shares
were cancelled and the book value of the remaining shares was
changed to $0.50 per share (See Item 7 - Certain Relationships and
Related Transactions).
<F2> Consideration consisted of pre-incorporation consulting services
rendered to the Registrant related to investigating and developing the
Registrant's proposed business plan and capital structure and
completing the organization and incorporation of the Registrant.
<F3> Indicates price per share without allocating any portion of the
purchase price to the Class A Warrants or Class B Warrants.
</FN>
</TABLE>
Each of the sales listed above was made for cash or services.
All of the listed sales were either made in reliance upon the exemption
from registration provided by Rule 701 adopted pursuant to Section
3(b) of the Securities Act of 1933, or in reliance upon the exemption
from registration offered by Section 4(2) of the Securities Act of
1933. Based upon Purchaser Questionnaires and/or Consultation and
Subscription Agreements completed by each of the subscribers and the
pre-existing relationship between the subscribers of the Company's
officers and directors, the Company had reasonable grounds to believe
immediately prior to making an offer to the private investors, and did
in fact believe, when such subscriptions were accepted, that such
purchasers (1) were purchasing for investment and not with a view to
distribution, and (2) had such knowledge and experience in financial
and business matters that they were capable of evaluating the merits
and risks of their investment and were able to bear those risks. The
purchasers had access to pertinent information enabling them to ask
informed questions. The shares were issued without the benefit of
registration. An appropriate restrictive legend is imprinted upon each
of the certificates representing such shares, and stop-transfer
instructions have been entered in the Company's transfer records. All
such sales were effected without the aid of underwriters, and no sales
commissions were paid.
Item 5. Indemnification of Directors and Officers
The Articles of Incorporation and the Bylaws of the Company,
filed as Exhibits 3.1 and 3.2, respectively, provide that the Company
will indemnify its officers and directors for costs and expenses
incurred in connection with the defense of actions, suits, or
proceedings where the officer or director acted in good faith and in a
manner he reasonably believed to be in the Company's best interest
and is a party by reason of his status as an officer or director, absent
a finding of negligence or misconduct in the performance of duty.
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements for Buffalo Capital IV, Ltd. as and
for the period ending May 31, 1997. See following pages.
<PAGE>
BUFFALO CAPITAL IV, LTD.
(A Development Stage Company)
Report of Independent Certified Public Accountant
Balance Sheet
Statement of Loss and Accumulated Deficit
Statement of Stockholders' Equity
Statement of Cash Flows
Notes to Financial Statements<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors and Stockholders of
Buffalo Capital IV, Ltd.
We have audited the accompanying balance sheet of Buffalo Capital IV, Ltd.
(a development stage company) as of May 31, 1997, and the related
statement of loss and accumulated deficit, stockholders' equity, and cash
flows for the initial period ended August 31, 1996 and the nine months
ended May 31, 1997, and for the period from inception (August 28, 1996)
to May 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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 Buffalo Capital IV, Ltd. as of
August 31, 1996, and May 31, 1997, and the results of its operations and
cash flows for the period ended May 31, 1997, in conformity with generally
accepted accounting principles.
Comiskey & Company, P.C.
Aurora, Colorado
July 15, 1997<PAGE>
BUFFALO CAPITAL IV, LTD.
(A Development Stage Company)
BALANCE SHEET
May 31, 1997
(Audited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 3,731
Total current assets 3,731
OTHER ASSETS
Organizational costs (net) 255
Total Other Assets 255
TOTAL ASSETS 3,986
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Total current liabilities -
STOCKHOLDERS' EQUITY
Preferred stock, no par value
10,000,000 shares authorized;
no shares issued and outstanding
Common stock, no par value; -
100,000,000 shares authorized;
135,000 shares issued and
outstanding at May 31, 1997. 7,500
Additional paid-in capital 60,450
Deficit accumulated
during the development stage (63,964)
Total stockholders' equity 3,986
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 3,986
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
BUFFALO CAPITAL IV, LTD.
(A Development Stage Company)
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Period from For the For the
August 28, 1996 nine months initial period
(Inception) ended ended
May 31, 1997 May 31, 1997 August 31, 1996
<S> <C> <C> <C>
REVENUES
Investment Income - - -
EXPENSES
Amortization 45 45 -
Bank charges - (6) 6
Consulting Fees 59,800 59,760 40
Directors' fees 200 - 200
Filing Fee 55 55 -
Legal and accounting 3,411 3,306 105
Office Expense 3 3 -
Rent Expense 450 450 -
Total expenses 63,964 63,613 351
NET LOSS (63,964) (63,613) (351)
Accumulated deficit
Balance, beginning of period - (351) -
Balance, end of period (63,964) (63,964) (351)
NET LOSS PER SHARE (NIL) (NIL) (NIL)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
135,000 135,000 135,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BUFFALO CAPITAL IV, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (August 28, 1996) to May 31, 1997
(Page 1 of 2)
<TABLE>
<CAPTION>
Deficit
accumulated Total
Common Stock during the stock-
Number of development holder
shares Amount stage equity
<S> <C> <C> <C> <C>
Common stock issued for
cash and subscriptions,
receivable, August 1996
at $.50 per share 15,000 7,500 - 7,500
Common stock issued for
services, August 1996
at $.0001 per share 2,400,000 240 - 240
Net loss for the period
ended August 31, 1996 - - (351) (351)
Balance
August 31, 1996 2,415,000 7,740 (351) 7,389
Shares cancelled at
$.0001 per share (2,280,000) - - -
Record and reclass
APIC for services - (240) - 59,760
Rent provided at
no charge - - - 450
Net loss for the period
ended May 31, 1997 - - (63,613) (63,613)
Balance May 31, 1997 135,000 7,500 (63,964) 3,986
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BUFFALO CAPITAL IV, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (August 28, 1996) to May 31, 1997
(Page 2 of 2)
<TABLE>
<CAPTION>
Additional
Paid-in
Capital
<S> <C>
Common stock issued for
cash and subscriptions,
receivable, August 1996
at $.50 per share -
Common stock issued for
services, August 1996
at $.0001 per share -
Net loss for the period
ended August 31, 1996 -
Balance
August 31, 1996 -
Shares cancelled at
$.0001 per share -
Record and reclass
APIC for services 60,000
Rent provided at
no charge 450
Net loss for the period
ended May 31, 1997 -
Balance May 31, 1997 60,450
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
BUFFALO CAPITAL IV, LTD.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period from For the For the
August 28, 1996 nine months initial period
(Inception) ended ended
May 31, 1997 May 31, 1997 August 31, 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (63,964) (63,613) (351)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Amortization 45 45 -
Rent expense 450 450 -
Stock issued for
directors' fees 59,960 59,760 200
Stock issued for
consulting fees 40 - 40
Increase (decrease) in
accounts payable -
related party - (405) 405
Net cash used by
operating activities (3,469) (3,763) 294
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs (300) - (300)
Net cash used by
investing activities (300) - (300)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 7,500 2,500 5,000
Net cash provided by
financing activities 7,500 2,500 5,000
NET INCREASE (DECREASE) IN CASH
AND CASH
EQUIVALENTS 3,371 (1,263) 4,994
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 4,994 -
CASH AND CASH EQUIVALENTS,
END OF PERIOD 3,731 3,731 4,994
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BUFFALO CAPITAL IV, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company
Buffalo Capital IV, Ltd. (a development stage company) (the "Company")
was incorporated under the laws of the State of Colorado on August 28,
1996. Its office is located at the office of its President at 7331 South
Meadow Court, Boulder, CO 80301.
The Company is a new enterprise in the development stage as defined by
Statement No. 7 of the Financial Accounting Standards Board and has not
engaged in any business other than organizational efforts. It has no full-time
employees and owns now real property. The Company intends to operate
as a capital market access corporation by registering with the U.S. Securities
and Exchange Commission under the Securities Exchange Act of 1934.
After this, the Company intends to seek to acquire one or more existing
businesses which have existing management, through merger or acquisition.
Management of the Company will have virtually unlimited discretion in
determining the business activities in which the Company might engage.
Accounting Method
The Company records income and expenses on the accrual method.
Fiscal year
The Company has selected an August 31 fiscal year end.
Organization costs
Costs to incorporate the Company have been capitalized and will be
amortized over a sixty-month period.
Loss per share
Loss per share was computed using the weighted number of shares
outstanding during the period.
Statement of cash flows
For the purpose of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Use of estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principals requires the Company's
management to make estimates and assumptions that effect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
2. STOCKHOLDERS' EQUITY
As of May 31, 1997, 135,000 shares of the Company's no par value
common stock were issued and outstanding, along with 4,830,000 Class A
warrants and 2,415,000 Class B warrants entitling the holder to purchase one
share of stock for $2.00 and $4.00, respectively. Of these shares 120,000
were subscribed by directors for services rendered in the capacity of
directors and consultants. The remaining 15,000 shares were issued for cash
at a price of $.50 per share.
For the period ended May 31, 1997, 2,280,000 shares of the Company's
common stock were cancelled. All share and per share amounts have been
restated to reflect these cancellations effective to the Company's inception.
3. RELATED PARTY TRANSACTIONS
The Company's two directors and officers are also principal shareholders.
Each has received 30,000 shares of stock (22.22% each of the outstanding
shares). In each case, the shares were issued for services provided which
have been valued at a total of $60,000.
Gary Joiner, corporate counsel and one of the principle shareholders of the
Company has been paid a total of $2,500 and $-0- for legal services
rendered during the nine months ended May 31, 1997, and the initial period
ended August 31, 1996, respectively.
The Company's President is providing an office mailing address at no charge
to the Company. For purposes of the financial statements, the Company is
accruing $50 per month as additional paid-in capital for this service.
4. INCOME TAXES
The Company has Federal net operating loss carryforwards of approximately
$64,000 expiring in the years 2011 and 2012. The tax benefit of these net
operating losses, which totals approximately $12,400, has been offset by a
full allowance for realization. This carryforward may be limited upon the
consummation of a business combination under IRC Section 381. For the
period ended May 31, 1997, the valuation allowance increased by $12,332.
5. SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES
During the nine months ended May 31, 1997, the Company recorded
amortization of the organization costs of $45.
Similarly, the Company recorded rent expense for the nine months ended
May 31, 1997 of $50 per month for a total of $450.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES: The Company remains in the
development stage, and since inception, has experienced no significant
change in liquidity or capital resources or stockholder's equity other than the
receipt of proceeds in the amount of $7,500 from its inside capitalization
funds. Consequently, the Company's balance sheet for the period ending
May 31, 1997, reflects a current asset value of $3,731 and a total asset value
of $3,986.
RESULTS OF OPERATION: During the period from August 28, 1996
(inception) through May 31, 1997, the Company has engaged in no
significant operations other than the acquisition of capital and registering its
securities under the Securities and Exchange Act of 1934, as amended. No
revenues were received by the Company during this period. The Company
has experienced a net loss of $63,964 since inception. This loss is primarily
the result of legal and accounting costs of compliance with the reporting
requirements of the securities laws and issuance of stock to the Company's
officers and directors and other non-management principal shareholders for
consulting services related to organization of the Company and development
of its business plan.
For the current fiscal year, the Company anticipates an increased net loss
owing to expenses associated with locating and evaluating acquisition
candidates. The Company anticipates that until a business combination is
completed with an acquisition candidate, it will not generate revenues, and
may continue to operate at a loss after completing a business combination,
depending upon the performance of the acquired business.
NEED FOR ADDITIONAL FINANCING: It is not anticipated that the
Company will require additional funds to pay its expenses, including the
costs of compliance with the continuing reporting requirements of the
Securities and Exchange Act of 1934, as amended, up to the date of
completion of a merger or acquisition transaction. The Company may
require additional funds to pay its expenses after that date. However, as of
the date of this report, the Company has no known commitments to provide
funds.
PART III
Item 1. INDEX TO EXHIBITS
The Exhibits listed below are filed as part of this Amended
Registration Statement.
<TABLE>
<CAPTION>
Exhibit
No. Document
<S> <C>
Item 2. Description of Exhibits.
2.1 Articles of Incorporation
2.2 Bylaws
3.1 Warrant Agent Agreement
3.2 Specimen Stock Certificate
3.3 Specimen Class A Warrant and Class B Warrant Certificates
</TABLE>
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.
BUFFALO CAPITAL IV, LTD.
By: /s/ ________________________________
Grant W. Peck
President and Director
Date: August 8, 1997
<PAGE>
U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
BUFFALO CAPITAL IV, LTD.
(Name of Small Business Issuer in its charter)
Colorado 84-1356427
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7331 S. Meadow Court,
Boulder, Colorado 80301
(Address of Principal Office) Zip Code
Issuer's telephone number: (303) 530-3353
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Document
<S> <C>
2.1 Articles of Incorporation
2.2 Bylaws
3.1 Warrant Agent Agreement
3.2 Specimen Stock Certificate
3.3 Specimen Class A Warrant and Class B Warrant Certificates
/TABLE
<PAGE>
EXHIBIT 2.1 - ARTICLES OF INCORPORATION OF BUFFALO
CAPITAL IV, LTD.
The undersigned, who, if a natural person, is eighteen years of age
or older, hereby establishes a corporation pursuant to the Colorado Business
Corporation Act as amended and adopts the following Articles of Incorpora-
tion:
FIRST: The name of the corporation is Buffalo Capital IV,
Ltd.
SECOND: The corporation shall have and may exercise all of the
rights, powers and privileges now or hereafter conferred upon corporations
organized under the laws of Colorado. In addition, the corporation may do
everything necessary, suitable or proper for the accomplishment of any of
its corporate purposes. The corporation may conduct part or all of its
business in any part of Colorado, the United States or the world and may
hold, purchase, mortgage, lease and convey real and personal property in any
of such places.
THIRD: The aggregate number of shares which the corporation
shall have authority to issue is one hundred ten million (110,000,000) shares
of which a portion shall be common stock and a portion shall be preferred
stock, all as described below.
A. Common Stock. The aggregate number of common
shares which the corporation shall have the authority to issue is one hundred
million (100,000,000), which shares shall be designated "Common Stock."
Subject to all the rights of the Preferred Stock as expressly provided herein,
by law or by the Board of Directors pursuant to this Article, the Common
Stock of the corporation shall possess all such rights and privileges as are
afforded to capital stock by applicable law in the absence of any express
grant of rights or privileges in these Articles of Incorporation, including, but
not limited to, the following rights and privileges:
(a) dividends may be declared and paid or set apart for payment
on the Common Stock out of any assets or funds of the corporation legally
available for the payment of dividends;
(b) the holders of Common Stock shall have unlimited voting
rights, including the right to vote for the election of directors and on all
other matters requiring stockholder action. Each holder of Common Stock
shall have one vote for each share of Common Stock standing in his name
on the books of the corporation and entitled to vote, except that in the
election of directors each holder of Common Stock shall have as many votes
for each share of Common Stock held by him as there are directors to be
elected and for whose election the holder of Common Stock has a right to
vote. Cumulative voting shall not be permitted in the election of directors
or otherwise.
(c) on the voluntary or involuntary liquidation, dissolution or
winding up of the corporation, and after paying or adequately providing for
the payment of all of its obligations and amounts payable in liquidation,
dissolution or winding up, and subject to the rights of the holders of
Preferred Stock, if any, the net assets of the corporation shall be distributed
pro rata to the holders of the Common Stock.
B. Preferred Stock. The aggregate number of preferred
shares which this corporation shall have the authority to issue is ten million
(10,000,000) shares, each with no par value, which shares shall be
designated "Preferred Stock." Shares of Preferred Stock may be issued from
time to time in one or more series as determined by the Board of Directors.
The Board of Directors is hereby authorized, by resolution or resolutions, to
provide from time to time, out of the unissued shares of Preferred Stock not
then allocated to any series of Preferred Stock, for a series of the Preferred
Stock. Each such series shall have distinctive serial designations. Before
any shares of any such series of Preferred Stock are issued, the Board of
Directors shall fix and determine, and is hereby expressly empowered to fix
and determine, by resolution or resolutions, the voting powers, full or
limited, or no voting powers, and the designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof as provided by Colorado law. Before
issuing any shares of a class or series, the corporation shall deliver to the
secretary of state for filing articles of amendment to these articles of
incorporation that set forth information required by Colorado law, including
but not limited to, the designations, preferences, limitations, and relative
rights of the class or series of shares.
C. Voting. Unless otherwise ordered by a court of
competent jurisdiction, at all meetings of shareholders one-third of the shares
of a voting group entitled to vote at such meeting, represented in person or
by proxy, shall constitute a quorum of that voting group.
FOURTH: The number of directors of the corporation shall be
fixed by the bylaws, should the bylaws fail to fix such a number, then by
resolution adopted from time to time by the board of directors, provided that
the number of directors shall not be more than five (5) nor less than two (2).
Two (2) directors shall constitute the initial board of directors. The
following persons are elected to serve as the corporation's initial directors
until the first annual meeting of shareholders or until their successors are
duly elected and qualified:
Name/Address:
Grant W. Peck
7331 South Meadow Court
Boulder, CO 80301
Dean F. Sessions
2040 W. 10th Avenue, Apt. E-301
Broomfield, Colorado 80020
FIFTH: The street address of the initial registered office of
the corporation is 4750 Table Mesa Drive, Boulder, Colorado 80303. The name
of the initial registered agent of the corporation at such address is Gary S.
Joiner.
SIXTH: The address of the initial principal office of the
corporation is 7331 South Meadow Court, Boulder, CO 80301.
SEVENTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of the
corporation, and the same are in furtherance of and not in limitation or
exclusion of the powers conferred by law.
(a) Conflicting Interest Transactions. As used in this
paragraph, "conflicting interest transaction" means any of the following: (i)
a loan or other assistance by the corporation to a director of the corporation
or to an entity in which a director of the corporation is a director or officer
or has a financial interest; (ii) a guaranty by the corporation of an obligation
of a director of the corporation or of an obligation of an entity in which a
director of the corporation is a director or officer or has a financial
interest; or (iii) a contract or transaction between the corporation and a
director of the corporation or between the corporation and an entity in which a
director of the corporation is a director or officer or has a financial
interest. No conflicting interest transaction shall be void or voidable, be
enjoined, be set aside, or give rise to an award of damages or other sanctions
in a proceeding by a shareholder or by or in the right of the corporation,
solely because the conflicting interest transaction involves a director of the
corporation or an
entity in which a director of the corporation is a director or officer or has a
financial interest, or solely because the director is present at or participates
in the meeting of the corporation's board of directors or of the committee
of the board of directors which authorized, approves or ratifies a conflicting
interest transaction, or solely because the director's vote is counted for such
purpose if: (A) the material facts as to the director's relationship or interest
and as to the conflicting interest transaction are disclosed or are known to
the board of directors or the committee, and the board of directors or
committee in good faith authorizes, approves or ratifies the conflicting
interest transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors are less than a quorum; or
(B) the material facts as to the director's relationship or interest and as to
the conflicting interest transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the conflicting interest transaction
is specifically authorized, approved or ratified in good faith by a vote of the
shareholders; or (C) a conflicting interest transaction is fair as to the
corporation as of the time it is authorized, approved or ratified by the board
of directors, a
committee thereof, or the shareholders. Common or interested directors may
be counted in determining the presence of a quorum at a meeting of the
board of directors or of a committee which authorizes, approves or ratifies
the conflicting interest transaction.
(b) Loans and Guaranties for the Benefit of Directors.
Neither the board of directors nor any committee thereof shall authorize a
loan by the corporation to a director of the corporation or to an entity in
which a director of the corporation is a director or officer or has a financial
interest, or a guaranty by the corporation of an obligation of a director of the
corporation or of an obligation of an entity in which a director of the
corporation is a director or officer or has a financial interest, until at least
ten days after written notice of the proposed authorization of the loan or
guaranty has been given to the shareholders who would be entitled to vote
thereon if the issue of the loan or guaranty were submitted to a vote of the
shareholders. The requirements of this paragraph (b) are in addition to, and
not in substitution for, the provisions of paragraph (a) of Article SEVENTH.
(c) Indemnification. The corporation shall indemnify, to
the maximum extent permitted by law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation against any claim,
liability or expenses arising against or incurred by such person made party
to a proceeding because he is or was a director, officer, agent, fiduciary or
employee of the corporation or because he was a director, officer, agent,
fiduciary or employee of the corporation or because he is or was serving
another entity as a director, officer, partner, trustee, employee, fiduciary or
agent at the corporation's request. The corporation shall further have the
authority to the maximum extent permitted by law to purchase and maintain
insurance providing such indemnification.
(d) Limitation on Director's Liability. No director of this
corporation shall have any personal liability for monetary damages to the
corporation or its shareholders for breach of his fiduciary duty as a director,
except that this provision shall not eliminate or limit the personal liability
of a director to the corporation or its shareholders for monetary damages for:
(i) any breach of the director's duty of loyalty to the corporation or its
shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) voting for or
assenting to a distribution in violation of Colorado Revised Statutes Section
7-106-401 or the articles of incorporation if it is established that the
director did not perform his duties in compliance with Colorado Revised Statutes
Section 7-108-401, provided that the personal liability of a director in this
circumstance shall be limited to the amount of the distribution which
exceeds what could have been distributed without violation of Colorado
Revised Statutes Section 7-106-401 or the articles of incorporation; or (iv)
any transaction from which the director directly or indirectly derives an
improper personal benefit. Nothing contained herein will be construed to
deprive any director of his right to all defenses ordinarily available to a
director nor will anything herein be construed to deprive any director of any
right he may have for contribution from any other director or other person.
(e) Negation of Equitable Interests in Shares or Rights.
Unless a person is recognized as a shareholder through procedures
established by the corporation pursuant to Colorado Revised Statutes Section
7-107-204 or any similar law, the corporation shall be entitled to treat the
registered holder of any shares of the corporation as the owner thereof for
all purposes permitted by the Colorado Business Corporation Act, including
without limitation all rights deriving from such shares, and the corporation
shall not be bound to recognize any equitable or other claim to, or interest
in, such shares or rights deriving from such shares on the part of any other
person including without limitation, a purchaser, assignee or transferee of
such shares, unless and until such other person becomes the registered holder
of such shares or is recognized as such, whether or not the corporation shall
have either actual or constructive notice of the claimed interest of such other
person. By way of example and not of limitation, until such other person
has become the registered holder of such shares or is recognized pursuant to
Colorado Revised Statutes Section 7-107-204 or any similar applicable law,
he shall not be entitled: (i) to receive notice of the meetings of the
shareholders; (ii) to vote at such meetings; (iii) to examine a list of the
shareholders; (iv) to be paid dividends or other distributions payable to
shareholders; or (v) to own, enjoy and exercise any other rights deriving
from such shares against the corporation. Nothing contained herein will be
construed to deprive any beneficial shareholder, as defined in Colorado
Revised Statutes Section 7-113-101(1), of any right he may have pursuant
to Article 113 of the Colorado Business Corporation Act or any subsequent
law.
EIGHTH: The name and address of the incorporator is:
Gary S. Joiner
4750 Table Mesa Drive
Boulder, Colorado 80303
DATED the 28th day of August, 1996.
/s/Gary S. Joiner
Incorporator
Gary S. Joiner hereby consents to the appointment as the initial registered
agent for Buffalo Capital IV, Ltd.
/s/Gary S. Joiner
Initial Registered Agent<PAGE>
EXHIBIT 2.2 - BYLAWS OF BUFFALO CAPITAL IV, LTD.
ARTICLE I
Offices
The principal office of the corporation shall be designated from time
to time by the corporation and may be within or outside of Colorado.
The corporation may have such other offices, either within or outside
Colorado, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not
be, identical with the principal office, and the address of the registered
office may be changed from time to time by the board of directors.
ARTICLE II
Shareholders
Section 1. Annual Meeting. The annual meeting of the
shareholders shall be held during the month of September of each year on
a date and at a time fixed by the board of directors of the corporation (or by
the president in the absence of action by the board of directors), beginning
with the year 1996, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
election of directors is not held on the day fixed as provided herein for any
annual meeting of the shareholders, or any adjournment thereof, the board
of directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as it may conveniently be held.
A shareholder may apply to the district court in the county in
Colorado where the corporation's principal office is located or, if the
corporation has no principal office in Colorado, to the district court of the
county in which the corporation's registered office is located to seek an
order that a shareholder meeting be held (i) if an annual meeting was not
held within six months after the close of the corporation's most recently
ended fiscal year or fifteen months after its last annual meeting, whichever
is earlier, or (ii) if the shareholder participated in a proper call of or
proper demand for a special meeting and notice of the special meeting was not
given within thirty days after the date of the call or the date the last of the
demands necessary to require calling of the meeting was received by the
corporation pursuant to C.R.S. Section 7-107-102(1)(b), or the special
meeting was not held in accordance with the notice.
Section 2. Special Meetings. Unless otherwise prescribed by
statute, special meetings of the shareholders may be called for any purpose
by the president or by the board of directors. The president shall call a
special meeting of the shareholders if the corporation receives one or more
written demands for the meeting, stating the purpose or purposes for which
it is to be held, signed and dated by holders of shares representing at least
ten percent of all the votes entitled to be cast on any issue proposed to be
considered at the meeting.
Section 3. Place of Meeting. The board of directors may
designate any place, either within or outside Colorado, as the place for any
annual meeting or any special meeting called by the board of directors. A
waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or outside Colorado, as the place for such
meeting. If no designation is made, or if a special meeting is called other
than by the board, the place of meeting shall be the principal office of the
corporation.
Section 4. Notice of Meeting. Written notice stating the place,
date, and hour of the meeting shall be given not less than ten nor more than
sixty days before the date of the meeting, except that (i) if the number of
authorized shares is to be increased, at least thirty days' notice shall be
given, or (ii) any other longer notice period is required by the Colorado
Business Corporation Act. Notice of a special meeting shall include a
description of the purpose or purposes of the meeting. Notice of an annual
meeting need not include a description of the purpose or purposes of the
meeting except the purpose or purposes shall be stated with respect to (i) an
amendment to the articles of incorporation of the corporation, (ii) a merger
or share exchange in which the corporation is a party and, with respect to
a share exchange, in which the corporation's shares will be acquired, (iii) a
sale, lease, exchange or other disposition, other than in the usual and regular
course of business, of all or substantially all of the property of the
corporation or of another entity which this corporation controls, in each case
with or without the goodwill, (iv) a dissolution of the corporation, or (v) any
other purpose for which a statement of purpose is required by the Colorado
Business Corporation Act. Notice shall be given personally or by mail,
private carrier, telegraph, teletype, electronically transmitted facsimile or
other form of wire or wireless communication by or at the direction of the
president, the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed and if in
a comprehensible form, such notice shall be deemed to be given and
effective when deposited in the United States mail, addressed to the
shareholder at his address as it appears in the corporation's current record
of shareholders, with postage prepaid. If notice is given other than by mail,
and provided that such notice is in a comprehensible form, the notice is
given and effective on the date received by the shareholder.
If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporation expense. No notice
need be sent to any shareholder if three successive notices mailed to the last
known address of such shareholder have been returned as undeliverable until
such time as another address for such shareholder is made known to the
corporation by such shareholder. In order to be entitled to receive notice of
any meeting, a shareholder shall advise the corporation in writing of any
change in such shareholder's mailing address as shown on the corporation's
books and records.
When a meeting is adjourned to another date, time or place, notice
need not be given of the new date, time or place if the new date, time or
place of such meeting is announced before adjournment at the meeting at
which the adjournment is taken. At the adjourned meeting the corporation
may transact any business which may have been transacted at the original
meeting. If the adjournment is for more than 120 days, or if a new record
date is fixed for the adjourned meeting, a new notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such shareholder. Such
waiver shall be delivered to the corporation for filing with the corporate
records. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because
of lack of notice or defective notice. By attending the meeting, the
shareholder also waives any objection to consideration at the meeting of a
particular matter not within the purpose or purposes described in the meeting
notice unless the shareholder objects to considering the matter when it is
presented.
Section 5. Fixing of Record Date. For the purposes of
determining shareholders entitled to (i) notice of or vote at any meeting of
shareholders or any adjournment thereof, (ii) receive distributions or share
dividends, or (ii) demand a special meeting, or to make a determination of
shareholders for any other proper purpose, the board of directors may fix a
future date as the record date for any such determination of shareholders,
such date in any case to be not more than seventy days, and, in case of a
meeting of shareholders not less than ten days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If no record date is fixed by the directors, the record date shall be the date
on which notice of the meeting is mailed to shareholders, or the date on
which the resolution of the board of directors providing for a distribution is
adopted, as the case may be. When a determination of shareholders entitled
to vote at any meeting of shareholders is made as provided in this Section,
such determination shall apply to any adjournment thereof unless the board
of directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action
is taken is first received by the corporation. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
Section 6. Voting Lists. The secretary shall make, at the earlier
of ten days before each meeting of shareholders or two business days after
notice of the meeting has been given, a complete list of the shareholders
entitled to be given notice of such meeting or any adjournment thereof. The
list shall be arranged by voting groups and within each voting group by class
or series of shares, shall be in alphabetical order within each class or series,
and shall show the address of and the number of shares of each class or
series held by each shareholder. For the period beginning the earlier of ten
days prior to the meeting or two business days after notice of the meeting
is given and continuing through the meeting and any adjournment thereof,
this list shall be kept on file at the principal office of the corporation, or
at a place (which shall be identified in the notice) in the city where the
meeting will be held. Such list shall be available for inspection on written
demand by any shareholder (including for the purpose of this Section 6 any
holder of voting trust certificates) or his agent or attorney during regular
business hours and during the period available for inspection. The original
stock transfer books shall be prima facie evidence as to the shareholders
entitled to examine such list or to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during
regular business hours and during the period it is available for inspection,
provided (i) the shareholder has been a shareholder for at least three months
immediately preceding the demand or holds at least five percent of all
outstanding shares of any class of shares as of the date of the demand, (ii)
the demand is made in good faith and for a purpose reasonably related to the
demanding shareholder's interest as a shareholder, (iii) the shareholder
describes with reasonable particularity the purpose and the records the
shareholder desires to inspect, (iv) the records are directly connected with
the described purpose and (v) the shareholder pays a reasonable charge
covering the costs of labor and material for such copies, not to exceed the
estimated cost of production and reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The
board of directors may adopt by resolution a procedure whereby a sharehold-
er of the corporation may certify in writing to the corporation that all or a
portion of the shares registered in the name of such shareholder are held for
the account of a specified person or persons. The resolution may set forth
(i) the types of nominees to which it applies, (ii) the rights or privileges
that the corporation will recognize in a beneficial owner, which may include
rights and privileges other than voting; (iii) the form of certification and the
information to be contained therein, (iv) if the certification is with respect
to a record date, the time within which the certification must be received by
the corporation, (v) the period for which the nominee's use of the procedure
is effective, and (vi) such other provisions with respect to the procedure as
the board deems necessary or desirable. Upon receipt by the corporation of
a certificate complying with the procedure established by the board of
directors, the persons specified in the certification shall be deemed, for the
purpose or purposes set forth in the certification, to be the registered holders
of the number of shares specified in place of the shareholder making the
certification.
Section 8. Quorum and Manner of Acting. One-third of the
votes entitled to be cast on a matter by a voting group shall constitute a
quorum of that voting group for action on the matter. If less than one-third
of such votes are represented at a meeting, a majority of the votes so
represented may adjourn the meeting from time to time without further
notice, for a period not to exceed 120 days for any one adjournment. If a
quorum is present at such adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, unless the meeting is adjourned
and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group
opposing the action, unless the vote of a greater number or voting by classes
is required by law or the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a sharehold-
er may vote by proxy by signing an appointment form or similar writing,
either personally or by his duly authorized attorney-in-fact. A shareholder
may also appoint a proxy by transmitting or authorizing the transmission of
a telegram, teletype, or other electronic transmission providing a written
statement of the appointment to the proxy, a proxy solicitor, proxy support
service organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from
which it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar
writing shall be filed with the secretary of the corporation before or at the
time of the meeting. The appointment of a proxy is effective when received
by the corporation and is valid for eleven months unless a different period
is expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile,
of an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment
could be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his authority under the appointment. Other
notice of revocation may, in the discretion of the corporation, be deemed to
include the appearance at a shareholders' meeting of the shareholder who
granted the proxy and his voting in person on any matter subject to a vote
at such meeting.
The death or incapacity of the shareholder appointing a proxy does
not affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment
made irrevocable if it has received a writing revoking the appointment
signed by the shareholder (including a shareholder who is a successor to the
shareholder who granted the proxy) either personally or by his attorney-in-
fact, notwithstanding that the revocation may be a breach of an obligation
of the shareholder to another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
Section 10. Voting of Shares. Each outstanding share, regardless
of class, shall be entitled to one vote, except in the election of directors,
and each fractional share shall be entitled to a corresponding fractional
vote on each matter submitted to a vote at a meeting of shareholders, except
to the extent that the voting rights of the shares of any class or classes are
limited or denied by the articles of incorporation as permitted by the Colorado
Business Corporation Act. Cumulative voting shall not be permitted in the
election of directors or for any other purpose. Each record holder of stock
shall be entitled to vote in the election of directors and shall have as many
votes for each of the shares owned by him as there are directors to be
elected and for whose election he has the right to vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast
in favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction
upon a finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the
shares has been deposited with a bank, trust company or other financial
institution under an irrevocable obligation to pay the holders the redemption
price on surrender of the shares.
Section 11. Corporation's Acceptance of Votes. If the name
signed on a vote, consent, waiver, proxy appointment, or proxy appointment
revocation corresponds to the name of a shareholder, the corporation, if
acting in good faith, is entitled to accept the vote, consent, waiver, proxy
appointment or proxy appointment revocation and give it effect as the act of
the shareholder. If the name signed on a vote, consent, waiver, proxy
appointment or proxy appointment revocation does not correspond to the
name of a shareholder, the corporation, if acting in good faith, is neverthe-
less entitled to accept the vote, consent, waiver, proxy appointment or proxy
appointment revocation and to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administra-
tor, executor, guardian or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy appoint-
ment revocation;
(iv) the name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's authority
to sign for the shareholder has been presented with respect to the vote,
consent, waiver, proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants
or fiduciaries and the name signed purports to be the name of at least one
of the co-tenants or fiduciaries, and the person signing appears to be acting
on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section
is liable in damages for the consequences of the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action
required or permitted to be taken at a meeting of the shareholders may be
taken without a meeting if a written consent (or counterparts thereof) that
sets forth the action so taken is signed by all of the shareholders entitled to
vote with respect to the subject matter thereof and received by the
corporation. Such consent shall have the same force and effect as a
unanimous vote of the shareholders and may be stated as such in the
document. Action taken under this Section 12 is effective as of the date the
last writing necessary to effect this action is received by the corporation,
unless all of the writings specify a different effective date, in which case
such specified date shall be the effective date for such action. If any
shareholder revokes his consent as provided for herein prior to what would
otherwise be the effective date, the action proposed in the consent shall be
invalid. The record date for determining shareholders entitled to take action
without a meeting is the date the corporation receives a writing upon which
the action is taken.
Any shareholder who has signed a writing describing and consenting
to action taken pursuant to this Section 12 may revoke such consent by a
writing signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders' meeting
by, or the meeting may be conducted through the use of, any means of
communication by which all persons participating in the meeting may hear
each other during the meeting. A shareholder participating in a meeting by
this means is deemed to be present in person at the meeting.
ARTICLE III
Board of Directors
Section 1. General Powers. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of its board of directors,
except as otherwise provided in the Colorado Business Corporation Act or
the articles of incorporation.
Section 2. Number, Qualifications and Tenure. The number of
directors of the corporation shall be fixed from time to time by the board of
directors, within a range of no less than three or more than five. A director
shall be a natural person who is eighteen years of age or older. A director
need not be a resident of Colorado or a shareholder of the corporation.
Directors shall be elected at each annual meeting of shareholders.
Each director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided
by the Colorado Business Corporation Act.
Section 3. Vacancies. Any director may resign at any time by
giving written notice to the corporation. Such resignation shall take effect
at the time the notice is received by the corporation unless the notice
specifies a later effective date. Unless otherwise specified in the notice of
resignation, the corporation's acceptance of such resignation shall not be
necessary to make it effective. Any vacancy on the board of directors may
be filled by the affirmative vote of a majority of the shareholders or the
board of directors. If the directors remaining in office constitute fewer than
a quorum of the board, the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office. If elected by the
directors, the director shall hold office until the next annual shareholder's
meeting at which directors are elected. If elected by the shareholders, the
director shall hold office for the unexpired term of his predecessor in office;
except that, if the director's predecessor was elected by the directors to fill
a vacancy, the director elected by the shareholders shall hold office for the
unexpired term of the last predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without notice immediately after and at the same
place as the annual meeting of shareholders. The board of directors may
provide by resolution the time and place, either within or outside Colorado,
for the holding of additional regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the president or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or outside Colorado, as
the place for holding any special meeting of the board of directors called by
them, provided that no meeting shall be called outside the State of Colorado
unless a majority of the board of directors has so authorized.
Section 6. Notice. Notice of any special meeting shall be given
at least two days prior to the meeting by written notice either personally
delivered or mailed to each director at his business address, or by notice
transmitted by telegraph, telex, electronically transmitted facsimile or other
form of wire or wireless communication. If mailed, such notice shall be
deemed to be given and to be effective on the earlier of (i) three days after
such notice is deposited in the United States mail, properly addressed, with
postage prepaid, or (ii) the date shown on the return receipt, if mailed by
registered or certified mail return receipt requested. If notice is given by
telex, electronically transmitted facsimile or other similar form of wire or
wireless communication, such notice shall be deemed to be given and to be
effective when sent, and with respect to a telegram, such notice shall be
deemed to be given and to be effective when the telegram is delivered to the
telegraph company. If a director has designated in writing one or more
reasonable addresses or facsimile numbers for delivery of notice to him,
notice sent by mail, telegram, telex, electronically transmitted facsimile or
other form of wire or wireless communication shall not be deemed to have
been given or to be effective unless sent to such addresses or facsimile
numbers, as the case may be.
A director may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such director. Such waiver
shall be delivered to the corporation for filing with the corporate records.
Further, a director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless at the beginning of the meeting,
or promptly upon his arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed
by the board of directors pursuant to Section 2 or, if no number is fixed, a
majority of the number in office immediately before the meeting begins,
shall constitute a quorum for the transaction of business at any meeting of
the board of directors. If less than such majority is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice, for a period not to exceed sixty days at any one
adjournment.
Section 8. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act
of the board of directors. No director may vote or act by proxy at any
meeting of directors.
Section 9. Compensation. By resolution of the board of
directors, any director may be paid any one or more of the following: his
expenses, if any, of attendance at meetings, a fixed sum for attendance at
each meeting, a stated salary as director, or such other compensation as the
corporation and the director may reasonably agree upon. No such payment
shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A director of the corporation
who is present at a meeting of the board of directors or committee of the
board at which action on any corporate matter is taken shall be presumed
to have assented to the action taken unless (i) the director objects at the
beginning of the meeting, or promptly upon his arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his dissent or abstention as to any specific
action taken be entered in the minutes of the meeting, or (iii) the director
causes written notice of his dissent or abstention as to any specific action to
be received by the presiding officer of the meeting before its adjournment
or by the corporation promptly after the adjournment of the meeting. A
director may dissent to a specific action at a meeting, while assenting to
others. The right to dissent to a specific action taken at a meeting of the
board of directors or a committee of the board shall not be available to a
director who voted in favor of such action.
Section 11. Committees. By resolution adopted by a majority of
all the directors in office when the action is taken, the board of directors
may designate from among its members an executive committee and one or
more other committees, and appoint one or more members of the board of
directors to serve on them. To the extent provided in the resolution, each
committee shall have all the authority of the board of directors, except that
no such committee shall have the authority to (i) authorize distributions, (ii)
approve or propose to shareholders actions or proposals required by the
Colorado Business Corporation Act to be approved by shareholders, (iii) fill
vacancies on the board of directors or any committee thereof, (iv) amend
articles of incorporation, (v) adopt, amend or repeal the bylaws, (vi) approve
a plan of merger not requiring shareholder approval, (vii) authorize or
approve the reacquisition of shares unless pursuant to a formula or method
prescribed by the board of directors, or (viii) authorize or approve the
issuance or sale of shares, or contract for the sale of shares or determine the
designations and relative rights, preferences and limitations of a class or
series of shares, except that the board of directors may authorize a
committee or officer to do so within limits specifically prescribed by the
board of directors. The committee shall then have full power within the
limits set by the board of directors to adopt any final resolution setting forth
all preferences, limitations and relative rights of such class or series and to
authorize an amendment of the articles of incorporation stating the
preferences, limitations and relative rights of a class or series for filing
with the Secretary of State under the Colorado Business Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article IIII, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their
members appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to
its authority shall alone constitute compliance by any member of the board
of directors or a member of the committee in question with his responsibility
to conform to the standards of care set forth in Article III, Section 14 of
these bylaws.
Section 12. Action Without a Meeting. Any action required or
permitted to be taken at a meeting of the directors or any committee
designated by the board of directors may be taken without a meeting if a
written consent (or counterparts thereof) that sets forth the action so taken
is signed by all of the directors entitled to vote with respect to the action
taken. Such consent shall have the same force and effect as a unanimous
vote of the directors or committee members and may be stated as such in
any document. Unless the consent specifies a different effective date, action
taken under this Section 12 is effective at the time the last director signs a
writing describing the action taken, unless, before such time, any director has
revoked his consent by a writing signed by the director and received by the
president or secretary of the corporation.
Section 13. Telephonic Meetings. The board of directors may
permit any director (or any member of a committee designated by the board)
to participate in a regular or special meeting of the board of directors or a
committee thereof through the use of any means of communication by which
all directors participating in the meeting can hear each other during the
meeting. A director participating in a meeting in this manner is deemed to
be present in person at the meeting.
Section 14. Standard of Care. A director shall perform his duties
as a director, including, without limitation his duties as a member of any
committee of the board, in good faith, in a manner he reasonably believes
to be in the best interests of the corporation, and with the care an ordinarily
prudent person in a like position would exercise under similar circumstances.
In performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith
if he has knowledge concerning the matter in question that would cause such
reliance to be unwarranted. A director shall not be liable to the corporation
or its shareholders for any action he takes or omits to take as a director if,
in connection with such action or omission, he performs his duties in
compliance with this Section 14.
The designated persons on whom a director is entitled to rely are (i)
one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, public accountant, or other person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors on which the
director does not serve if the director reasonably believes the committee
merits confidence.
ARTICLE IV
Officers and Agents
Section 1. General. The officers of the corporation shall be a
president, one or more vice presidents, a secretary, a treasurer, and/or such
other officers as may be appointed from time to time by the board of
directors, each of whom shall be a natural person eighteen years of age or
older. The board of directors or an officer or officers authorized by the
board may appoint such other officers, assistant officers, committees and
agents, including a chairman of the board, assistant secretaries and assistant
treasurers, as they may consider necessary. The board of directors or the
officer or officers authorized by the board shall from time to time determine
the procedure for the appointment of officers, their term of office, their
authority and duties and their compensation. One person may hold more
than one office. In all cases where the duties of any officer, agent or
employee are not prescribed by the bylaws, or by the board of directors,
such officer, agent or employee shall follow the orders and instructions of
the president of the corporation.
Section 2. Appointment and Term of Office. The officers of the
corporation shall be appointed by the board of directors at each annual
meeting of the board held after each annual meeting of the shareholders.
If the appointment of officers is not made at such meeting or if an officer
or officers are to be appointed by another officer or officers of the
corporation, such appointment shall be made as soon thereafter as conve-
niently may be. Each officer shall hold office until the first of the following
occurs: his successor shall have been duly appointed and qualified, his
death, his resignation, or his removal in the manner provided in Section 3.
Section 3. Resignation and Removal. An officer may resign at
any time by giving written notice of resignation to the corporation. The
resignation is effective when the notice is received by the corporation unless
the notice specifies a later effective date.
Any officer or agent may be removed at any time with or without
cause by the board of directors or an officer or officers authorized by the
board. Such removal does not affect the contract rights, if any, of the
corporation or of the person so removed. The appointment of an officer or
agent shall not in itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however
occurring, may be filled by the board of directors, or by the officer or
officers authorized by the board, for the unexpired portion of the officer's
term. If an officer resigns and his resignation is made effective at a later
date, the board of directors, or officer or officers authorized by the board,
may permit the officer to remain in office until the effective date and may
fill the pending vacancy before the effective date if the board of directors or
officer or officers authorized by the board provide that the successor shall
not take office until the effective date. In the alternative, the board of
directors, or officer or officers authorized by the board of directors, may
remove the officer at any time before the effective date and may fill the
resulting vacancy.
Section 5. President. Subject to the direction and supervision of
the board of directors, the president shall be the chief executive officer of
the corporation, and shall have general and active control of its affairs and
business and general supervision of its officers, agents and employees.
Unless otherwise directed by the board of directors, the president shall attend
in person or by substitute appointed by him, or shall execute on behalf of
the corporation written instruments appointing a proxy or proxies to
represent the corporation, at all meetings of the stockholders of any other
corporation in which the corporation holds any stock. On behalf of the
corporation, the president may in person or by substitute or by proxy execute
written waivers of notice and consents with respect to any such meetings.
At all such meetings and otherwise, the president, in person or by substitute
or proxy, may vote the stock held by the corporation, execute written
consents and other instruments with respect to such stock, and exercise any
and all rights and powers incident to the ownership or said stock, subject to
the instructions, if any, of the board of directors. The president shall have
custody of the treasurer's bond, if any.
Section 6. Vice Presidents. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, or if the board makes no such
designation, then the vice president designated by the president, or if neither
the board nor the president makes any such designation, the senior vice
president as determined by first election to that office), shall have the powers
and perform the duties of the president.
Section 7. Secretary. The secretary shall (i) prepare and
maintain as permanent records the minutes of the proceedings of the
shareholders and the board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, a record of all actions
taken by a committee of the board of directors in place of the board of
directors on behalf of the corporation, and a record of all waivers of notice
of meetings of shareholders and of the board of directors or any committee
thereof, (ii) see that all notices are duly given in accordance with the
provisions of these bylaws and as required by law, (iii) serve as custodian
of the corporate records and of the seal of the corporation and affix the seal
to all documents when authorized by the board of directors, (iv) keep at the
corporation's registered office or principal place of business a record
containing the names and addresses of all shareholders in a form that permits
preparation of a list of shareholders arranged by voting group and by class
or series of shares within each group, that is alphabetical within each class
or series and that shows the address of, and the number of shares of each
class or series held by each shareholder, unless such a record shall be kept
at the office of the corporation's transfer agent or registrar, (v) maintain at
the corporation's principal office the originals or copies of the corporation's
articles of incorporation, bylaws, minutes of all shareholders' meetings and
records of all action taken by shareholders without a meeting for the past
three years, all written communications within the past three years to
shareholders as a group or to the holders of any class or series of shares as
a group, a list of the name and business addresses of the current directors
and officers, a copy of the corporation's most recent corporate report filed
with the Secretary of State, and financial statements showing in reasonable
detail the corporation's assets and liabilities and results of operations for
the last three years, (vi) have general charge of the stock transfer books of
the corporation, unless the corporation has a transfer agent, (vii) authenticate
records of the corporation, and (vii) in general, perform all duties incident
to the office of secretary and such other duties as from time to time may be
assigned to him by the president or by the board of directors. Assistant
secretaries, if any, shall have the same duties and powers subject to
supervision by the secretary. The directors and/or shareholders may however
respectively designate a person other than the secretary or assistant secretary
to keep the minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in written
form or in any form capable of being converted into written form within a
reasonable time.
Section 8. Treasurer. The treasurer shall be the principal
financial officer of the corporation, shall have the care and custody of all
funds, securities, evidences of indebtedness and other personal property of
the corporation and shall deposit the same in accordance with the instruc-
tions of the board of directors. He shall receive and give receipts and
acquittances for money paid in on account of the corporation, and shall pay
out of the corporation's funds on hand all bills, payrolls and other just debts
of the corporation of whatever nature upon maturity. He shall perform all
other duties incident to the office of the treasurer and, upon request of the
board, shall make such reports to it as may be required at any time. He
shall, if required by the board, give the corporation a bond in such sums and
with such sureties as shall be satisfactory to the board, conditioned upon the
faithful performance of his duties and for the restoration to the corporation
of all books, papers, vouchers, money and other property of whatever kind
in his possession or under his control belonging to the corporation. He shall
have such other powers and perform such other duties as may from time to
time be prescribed by the board of directors or the president. The assistant
treasurers, if any, shall have the same powers and duties, subject to the
supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all
local, state and federal tax returns, prescribe and maintain an adequate
system of internal audit and prepare and furnish to the president and the
board of directors statements of account showing the financial position of the
corporation and the results of its operations.
ARTICLE V
Stock
Section 1. Certificates. The board of directors shall be
authorized to issue any of its classes of shares with or without certificates.
The fact that the shares are not represented by certificates shall have no
effect on the rights and obligations of shareholders. If the shares are
represented by certificates, such shares shall be represented by consecutively
numbered certificates signed, either manually or by facsimile, in the name
of the corporation by one or more persons designated by the board of
directors. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate is issued, such certificate may nonetheless be issued
by the corporation with the same effect as if he were such officer at the date
of its issue. Certificates of stock shall be in such form and shall contain
such information consistent with law as shall be prescribed by the board of
directors. If shares are not represented by certificates, within a reasonable
time following the issue or transfer of such shares, the corporation shall send
the shareholder a complete written statement of all of the information
required to be provided to holders of uncertificated shares by the Colorado
Business Corporation Act.
Section 2. Consideration for Shares. Certificated or un-
certificated shares shall not be issued until the shares represented thereby are
fully paid. The board of directors may authorize the issuance of shares for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed or
other securities of the corporation. Future services shall not constitute
payment or partial payment for shares of the corporation. The promissory
note of a subscriber or an affiliate of a subscriber shall not constitute
payment or partial payment for shares of the corporation unless the note is
negotiable and is secured by collateral, other than the shares being
purchased, having a fair market value at least equal to the principal amount
of the note. For purposes of this Section 2, "promissory note" means a
negotiable instrument on which there is an obligation to pay independent of
collateral and does not include a non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, the board of directors may
direct the issuance of a new certificate in lieu thereof upon such terms and
conditions in conformity with law as the board may prescribe. The board
of directors may in its discretion require an affidavit of lost certificate
and/or a bond in such form and amount and with such surety as it may determine
before issuing a new certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation
or to a transfer agent of the corporation of a certificate of stock duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and receipt of such documentary stamps as may be
required by law and evidence of compliance with all applicable securities
laws and other restrictions, the corporation shall issue a new certificate to
the person entitled thereto, and cancel the old certificate. Every such
transfer of stock shall be entered on the stock books of the corporation which
shall be kept at its principal office or by the person and at the place
designated by the board of directors.
Except as otherwise expressly provided in Article II, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent provided
in Article 113 of the Colorado Business Corporation Act, the corporation
shall be entitled to treat the registered holder of any shares of the corpora-
tion as the owner thereof for all purposes, and the corporation shall not be
bound to recognize any equitable or other claim to, or interest in, such
shares or rights deriving from such shares on the part of any person other
than the registered holder, including without limitation any purchaser,
assignee or transferee of such shares or rights deriving from such shares,
unless and until such other person becomes the registered holder of such
shares, whether or not the corporation shall have either actual or constructive
notice of the claimed interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The
board may at its discretion appoint one or more transfer agents, registrars
and agents for making payment upon any class of stock, bond, debenture or
other security of the corporation. Such agents and registrars may be located
either within or outside Colorado. They shall have such rights and duties
and shall be entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification of Certain Persons
Section 1. Indemnification. For purposes of Article VI, a
"Proper Person" means any person who was or is a party or is threatened to
be made a party to any threatened, pending, or complete action, suit or
proceeding, whether civil, criminal, administrative or investigative, and
whether formal or informal, by reason of the fact that he is or was a
director, officer, employee, fiduciary or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, partner,
trustee, employee, fiduciary or agent of any foreign or domestic profit or
nonprofit corporation or of any partnership, joint venture, trust, profit or
nonprofit unincorporated association, limited liability company, or other
enterprise or employee benefit plan. The corporation shall indemnify any
Proper Person against reasonably incurred expenses (including any attorneys'
fees), judgments, penalties, fines (including any excise tax assessed with
respect to an employee benefit plan) and amounts paid in settlement
reasonably incurred by him in connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that he conducted himself in good faith and that he reasonably
believed (i) in the case of conduct in his official capacity with the corpora-
tion, that his conduct was in the corporation's best interests, or (ii) in all
other cases (except criminal cases), that his conduct was at least not opposed
to the corporation's best interests, or (iii) in the case of any criminal
proceeding, that he had no reasonable cause to believe his conduct was
unlawful. A Proper Person will be deemed to be acting in his official
capacity while acting as a director, officer, employee or agent on behalf of
this corporation and not while acting on this corporation's behalf for some
other entity.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper Person
was adjudged liable to the corporation or in connection with any proceeding
charging that the Proper Person derived an improper personal benefit,
whether or not involving action in an official capacity, in which he was
adjudged liable on the basis that he derived an improper personal benefit.
Further, indemnification under this Section in connection with a proceeding
brought by or in the right of the corporation shall be limited to reasonable
expenses, including attorneys' fees, incurred in connection with the
proceeding.
Section 2. Right to Indemnification. The corporation shall
indemnify any Proper Person who was wholly successful, on the merits or
otherwise, in defense of any action, suit, or proceeding as to which he was
entitled to indemnification under Section 1 of this Article VI against
expenses (including attorneys' fees) reasonably incurred by him in
connection with the proceeding without the necessity of any action by the
corporation other than the determination in good faith that the defense has
been wholly successful.
Section 3. Effect of Termination of Action. The termination of
any action, suit or proceeding by judgment, order, settlement or conviction,
or upon a plea of nolo contendere or its equivalent, shall not of itself create
a presumption that the person seeking indemnification did not meet the
standards of conduct described in Section 1 of this Article VI. Entry of a
judgment by consent as part of a settlement shall not be deemed an
adjudication of liability, as described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification
Determination. Except where there is a right to indemnification as set forth
in Sections 1 or 2 of this Article or where indemnification is ordered by a
court in Section 5, any indemnification shall be made by the corporation
only as authorized in the specific case upon a determination by a proper
group that indemnification of the Proper Person is permissible under the
circumstances because he has met the applicable standards of conduct set
forth in Section 1 of this Article. This determination shall be made by the
board of directors by a majority vote of those present at a meeting at which
a quorum is present, which quorum shall consist of directors not parties to
the proceeding ("Quorum"). If a Quorum cannot be obtained, the determina-
tion shall be made by a majority vote of a committee of the board of
directors designated by the board, which committee shall consist of two or
more directors not parties to the proceeding, except that directors who are
parties to the proceeding may participate in the designation of directors for
the committee. If a Quorum of the board of directors cannot be obtained
and the committee cannot be established, or even if a Quorum is obtained
or the committee is designated and a majority of the directors constituting
such Quorum or committee so directs, the determination shall be made by
(i) independent legal counsel selected by a vote of the board of directors or
the committee in the manner specified in this Section 4, or, if a Quorum of
the full board of directors cannot be obtained and a committee cannot be
established, by independent legal counsel selected by a majority vote of the
full board (including directors who are parties to the action) or (ii) a vote of
the shareholders.
Section 5. Court-Ordered Indemnification. Any Proper Person
may apply for indemnification to the court conducting the proceeding or to
another court of competent jurisdiction for mandatory indemnification under
Section 2 of this Article, including indemnification for reasonable expenses
incurred to obtain court-ordered indemnification. If the court determines
that such Proper Person is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not he met the
standards of conduct set forth in Section 1 of this Article or was adjudged
liable in the proceeding, the court may order such indemnification as the
court deems proper except that if the Proper Person has been adjudged
liable, indemnification shall be limited to reasonable expenses incurred in
connection with the proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.
Section 6. Advance of Expenses. Reasonable expenses
(including attorneys' fees) incurred in defending an action, suit or proceed-
ing as described in Section 1 may be paid by the corporation to any Proper
Person in advance of the final disposition of such action, suit or proceeding
upon receipt of (i) a written affirmation of such Proper Person's good faith
belief that he has met the standards of conduct prescribed by Section 1 of
this Article VI, (ii) a written undertaking, executed personally or on the
Proper Person's behalf, to repay such advances if it is ultimately determined
that he did not meet the prescribed standards of conduct (the undertaking
shall be an unlimited general obligation of the Proper Person but need not
be secured and may be accepted without reference to financial ability to
make repayment), and (iii) a determination is made by the proper group (as
described in Section 3 of this Article VI) that the facts as then known to the
group would not preclude indemnification. Determination and authorization
of payments shall be made in the same manner specified in Section 4 of this
Article VI.
Section 7. Witness Expenses. The sections of this Article VI do
not limit the corporation's authority to pay or reimburse expenses incurred
by a director in connection with an appearance as a witness in a proceeding
at a time when he has not been a named defendant or respondent in the
proceeding.
Section 8. Report to Shareholders. Any indemnification of or
advance of expenses to a director in accordance with this Article VI, if
arising out of a proceeding by or on behalf of the corporation, shall be
reported in writing to the shareholders with or before the notice of the next
shareholders' meeting. If the next shareholder action is taken without a
meeting at the instigation of the board of directors, such notice shall be
given to the shareholders at or before the time the first shareholder signs a
writing consenting to such action.
ARTICLE VII
Provision of Insurance
By action of the board of directors, notwithstanding any interest of
the directors in the action, the corporation may purchase and maintain
insurance, in such scope and amounts as the board of directors deems
appropriate on behalf of any person who is or was a director, officer,
employee, fiduciary or agent of the corporation, or who, while a director,
officer, employee, fiduciary or agent of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee, fiduciary or agent of any other foreign or domestic corporation
or of any partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company or other enterprise or employee benefit
plan, against any liability asserted against, or incurred by, him in that
capacity arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Article VI or applicable law. Any such insurance may be
procured from any insurance company designated by the board of directors
of the corporation, whether such insurance company is formed under the
laws of Colorado or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity
interest or any other interest, through stock ownership or otherwise.
ARTICLE VIII
Miscellaneous
Section 1. Seal. The corporate seal of the corporation shall be
circular in form and shall contain the name of the corporation and the words,
"Seal, Colorado."
Section 2. Fiscal Year. The fiscal year of the corporation shall
be as established by the board of directors.
Section 3. Amendments. The board of directors shall have
power, to the maximum extent permitted by the Colorado Business
Corporation Act, to make, amend and repeal the bylaws of the corporation
at any regular or special meeting of the board unless the shareholders, in
making, amending or repealing a particular bylaw, expressly provide that the
directors may not amend or repeal such bylaw. The shareholders also shall
have the power to make, amend or repeal the bylaws of the corporation at
any annual meeting or at any special meeting called for that purpose.
Section 4. Gender. The masculine gender is used in these
bylaws as a matter of convenience only and shall be interpreted to include
the feminine and neuter genders as the circumstances indicate.
Section 5. Conflicts. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation
or applicable law, the latter shall control.
Section 6. Definitions. Except as otherwise specifically provided
in these bylaws, all terms used in these bylaws shall have the same definition
as in the Colorado Business Corporation Act.
THE FOREGOING BYLAWS, consisting of eighteen (18) pages,
including this page, constitute the bylaws of Buffalo Capital IV, Ltd.
adopted by the board of directors of the corporation as of August 28, 1996.
/s/
Secretary<PAGE>
EXHIBIT 3.1 - WARRANT AGENT AGREEMENT
AGREEMENT, dated this ____ day of ______________, 1996,
between Buffalo Capital IV, Ltd., a Colorado corporation (the "Company"),
and Buffalo Capital IV, Ltd., or its assigns, as warrant agent (the "Warrant
Agent").
W I T N E S S E T H:
WHEREAS, the Company is issuing 4,830,000 Class A Common
Stock Purchase Warrants ("Class A Warrants"), and 2,415,000 Class B
Common Stock Warrants ("Class B Warrants"), each such warrant to
purchase one (1) share of the Company's Common Stock, no par value per
share (the "Common Stock"), and all such Class A Warrants and Class B
Warrants are hereinafter collectively referred to as the "Warrants;" and
WHEREAS, each Warrant entitles the registered holder to purchase
one (1) share of Common Stock; and
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf
of the Company, and the Warrant Agent is willing so to act, in connection
with the issuance, registration, transfer and exchange of certificates
representing the Warrants and the exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, and for the purpose of defining the
terms and provisions of the Warrants and the certificates representing the
Warrants and the respective rights and obligations thereunder of the
Company, the holders of certificates representing the Warrants, and the
Warrant Agent, the parties hereto agree as follows:
SECTION 1. Definitions.
For purposes of this Agreement, the terms listed below shall have the
respective meanings set forth below in this Section, unless the context shall
require otherwise.
(a) "Common Stock" shall mean common stock of the
Company, whether now or hereafter authorized, which has the right to
participate in the distribution of earnings and assets of the Company without
limit as to amount or percentage, which as authorized at the date hereof
consists of 100,000,000 shares.
(b) "Warrant Expiration Date" shall mean 5 p.m.
(Mountain Time) on December 31, 2002, or if such a date shall, in the State
of Colorado, be a holiday or a day on which banks are authorized to close,
then 5 p.m. (Mountain Time) on the next following day which, in the State
of Colorado, is not a holiday or a day on which banks are authorized to
close. The Warrant Expiration Date may be extended from time to time for
an indefinite period, by action of the Company, upon giving five (5) days
prior notice to the Warrant Agent. Unless exercised during the Warrant
Exercise Period, as defined below, the Warrants will thereafter automatically
expire.
(c) "Warrant Exercise Period" shall mean from January
1, 1997, until the Warrant Expiration Date.
(d) "Corporate Office" shall mean the office of the
Warrant Agent (or its successor) at which at any particular time its principal
business in Denver, Colorado, shall be administered, which office is located
at the date hereof at 7331 S. Meado Court, Boulder, Colorado 80301.
(e) "Exercise Date" shall mean the date a certificate
representing a Warrant is surrendered for exercise.
(f) "Purchase Price" shall mean (i) $2.00 per share of
Common Stock in the case of a Class A Warrant, and (ii) $4.00 per share
of Common Stock in the case of a Class B Warrant, unless either such
purchase price shall have been reduced as hereinafter provided. The
Company may, in its sole discretion, reduce the Purchase Price of either the
Class A Warrants or the Class B Warrants upon five (5) days prior notice
to the Warrant Agent. Subject to the provisions of Sections 4 and 5 and the
other conditions set forth in this Agreement, each Warrant is exercisable for
one (1) share of Common Stock upon payment of the Purchase Price at any
time during the Warrant Exercise Period.
(g) "Registered Holder" shall mean the person in whose
name any certificate representing Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 7.
(h) "Subsidiary" or "Subsidiaries" shall mean any
corporation or corporations, as the case may be, of which stock having
ordinary power to elect a majority of the Board of Directors of such
corporation (regardless of whether at the time stock of any other class or
classes of such corporation shall have or may have voting power by reason
of the happening of any contingency) is at the time directly or indirectly
owned by the Company or by one or more subsidiaries, or by the Company
and one or more Subsidiaries.
(i) "Transfer Agent" shall mean the Company, or its
authorized successor.
(j) "Warrant Certificate" shall mean a certificate
representing Warrants.
SECTION 2. Warrants and Issuance of Warrant Certificates;
Stop-Transfer Order.
(a) Each Warrant shall entitle the Registered Holder of
the Warrant Certificate
representing such Warrant to purchase one share of Common
Stock upon the exercise thereof. Until the Company shall have consummat-
ed a business combination that does not result in the cancellation of the
Warrants pursuant to Section 5(a), the Warrants (i) shall be
subject to a stop-transfer order, and (ii) may not be transferred on the books
and records of the Company. Unless the Warrants shall have been cancelled
pursuant to Section 5(a), the Warrants shall become freely transferable upon
the consummation of a business combination by the Company.
(b) Upon execution of this Agreement, Warrant
Certificates representing up to an aggregate of 4,830,000 Class A Warrants
to purchase an aggregate of 4,830,000 shares of Common Stock and Warrant
Certificates representing up to an aggregate of 2,415,000 Class B Warrants
to purchase an aggregate of 2,415,000 shares of Common Stock, shall be
executed by the Company and delivered to the Warrant Agent and, after the
corresponding certificates for Warrants shall have been duly countersigned
by the Transfer Agent of the Company's Common Stock, shall be counter-
signed, issued and delivered by the Warrant Agent upon written order of the
Company signed by its Chief Executive Officer, President, or a Vice
President and its Treasurer or an Assistant Treasurer or its Secretary or
Assistant Secretary.
(c) From time to time, up to the Warrant Expiration Date,
plus such additional time as may reasonably be required to perform,
accomplish and complete necessary administrative functions connected with
the exercise of the Warrants, the Transfer Agent shall countersign and
deliver stock certificates representing up to an aggregate of 4,830,000 shares
of Common Stock upon the exercise of the Class A Warrants and up to an
aggregate of 2,415,000 shares of Common Stock upon the exercise of the
Class B Warrants pursuant to the terms of this Agreement.
(d) From time to time, up to the Warrant Expiration Date,
the Warrant Agent shall countersign and deliver Warrant Certificates in
required whole number denominations to the persons entitled thereto in
connection with any transfer or exchange permitted under this Agreement.
Except as provided in Section 8 hereof, no Warrant Certificates shall be
issued except (i) Warrant Certificates initially issued hereunder, (ii)
Warrant Certificates issued upon the exercise of any Warrants, to evidence
the unexercised Warrants held by the exercising Registered Holder, and (iii)
Warrant Certificates issued upon any transfer or exchange of Warrants.
SECTION 3. Form and Execution of Warrant Certificates.
The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A and Exhibit B (the provisions of which are incorporated
herein by this reference) and may have such letters, numbers or other marks
of identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agree-
ment, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Class A Warrants or the Class B Warrants may be
listed, or to conform to usage. The Warrant Certificates shall be dated the
date of issuance thereof (whether upon initial issuance, transfer, exchange or
in lieu of mutilated, lost, stolen or destroyed Warrant Certificates). Class A
Warrants shall be numbered serially with the letters W-A on Class A
Warrants of all denominations. Class B Warrants shall be numbered serially
with the letters W-B on Class B Warrants of all denominations.
Warrant Certificates shall be executed on behalf of the Company by
its Chief Executive Officer, President or any Vice President and its Treasurer
or an Assistant Treasurer or its Secretary or an Assistant Secretary, by
manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates
shall be manually countersigned by the Warrant Agent and shall not be valid
for any purpose unless so countersigned. In case any office of the Company
who shall have signed any of the Warrant Certificates shall cease to be such
officer of the Company before the date of issuance of the Warrant
Certificates or before countersignature by the Warrant Agent and issue and
delivery thereof, such Warrant Certificates, nevertheless, may be counter-
signed by the Warrant Agent, issued and delivered with the same force and
effect as though the person who signed such Warrant Certificates had not
ceased to be such officer of the Company.
SECTION 4. Exercise of Warrants.
Subject to (i) the provisions of Section 5 and the other conditions set
forth in this Agreement, (ii) the current prospectus requirements of the
Securities Act of 1933, as amended, and (iii) any additional conditions set
forth in the applicable Warrant Certificate, each Warrant represented by a
Warrant Certificate may be exercised during the applicable Warrant Exercise
Period upon the terms set forth herein and in the applicable Warrant
Certificate. A Warrant shall be deemed to have been exercised immediately
prior to the close of business on the applicable Exercise Date, provided that
the Warrant Certificate representing such Warrant, with the appropriate
exercise form thereon duly executed by the Registered Holder thereof or his
or her attorney duly authorized in writing, together with payment in cash, or
by official bank or certified check made payable to the Company, of an
amount equal to the applicable Purchase Price has been timely received by
the Warrant Agent. Payment must be made in United States funds. The
person entitled to receive the securities deliverable upon such exercise shall
be treated, for all purposes, as the holder of such securities as of the close
of business on the Exercise Date. The Company shall not be obligated to
issue any fractional share interests or fractional warrant interests upon the
exercise of any Warrant or Warrants. As soon as practicable on or after the
Exercise Date, and in any event within thirty (30) days after such date, if a
Warrant has been exercised, the Warrant Agent, on behalf of the Company,
shall cause to be issued to the person or persons entitled to receive the same,
a Common Stock certificate or certificates for the shares of Common Stock,
and the Warrant Agent shall deliver the same to the person or persons
entitled thereto. No adjustment shall be made in respect of dividends on any
shares delivered upon exercise of any Warrant. Upon the exercise of any
Warrants, the Warrant Agent shall promptly notify the Company in writing
of such fact and of the number of securities delivered upon such exercise
and shall cause all payments of an amount in cash or check made payable
to the order of the Company, equal to the Purchase Price, to be deposited
promptly into the Company's bank account.
Notwithstanding the other provisions hereof, no Warrants may be
exercised unless the Company maintains a current registration statement with
the U.S. Securities and Exchange Commission ("Registration Statement") in
effect during the exercise period of the Warrants. The Company will use its
best efforts to file a Registration Statement, and to keep the information on
the Company therein current during the period during which the Warrants
may be exercised. The Company will have no obligation, however, to file
or to keep the Registration Statement current for Common Stock to be issued
pursuant to a class of Warrants when the market bid price for the Company's
Common Stock is below the exercise price of such class of Warrants, or
when there is no current public market for the Company's Common Stock.
SECTION 5. Cancellation of Warrants. Anything in this Agree-
ment or in the applicable Warrant Certificate to the contrary notwithstanding,
the Warrants shall be subject to cancellation by the Company as follows:
(a) Subject to the limitations set forth below in this Subsection (a), all, but
not less than all, of the Warrants may be cancelled by the Company at any
time prior to the declaration by the Securities and Exchange Commission of
the effectiveness of a Registration Statement under which the Common
Stock shall have been registered without prior written notice to the registered
holders of the Warrants and without any right on the part of the holders of
the Warrants to exercise their purchase rights prior to the cancellation date.
Upon cancellation, the Warrantholder will forfeit his right to purchase the
Common Stock underlying the Warrants. Because the Warrants may be
exercised only so long as the Company meets the current prospectus
requirements of the Securities Act of 1933, as amended, a cancellation of the
Warrants pursuant to this Subsection (a) will mean that the Warrantholder
shall never have received an opportunity to exercise the Warrants following
the acquisition of a business opportunity by the Company. The Company's
right to cancel the Warrants in accordance with this Subsection (a) may be
exercised, however, only in the event that management of a business
opportunity that is the target of a business combination with the Company
shall have required, in writing, that the cancellation of the Warrants shall be
a condition precedent to the consummation of the business combination
between the Company and the target company. The cancellation is to
become effective only upon the closing of such a business combination.
Should the contemplated business combination fail to close, the cancellation
shall be void and the exercisability of the Warrants covered by the
cancellation shall not be affected. The failure of one or more business
combinations to close shall not, however, impair the Company's right to
cancel Warrants under this Subsection (a) if the Company enters into
arrangements for a subsequent business combination featuring the warrant-
- -cancellation condition described in this Subsection (a). To the extent that
the management of a business opportunity that consummates a business
combination with the Company does not require cancellation of Warrants as
a condition of closing, the right of the Company to cancel Warrants under
this Subsection (a) shall be extinguished. (b) In addition to the cancellation
mechanism described in Subsection (a), above, all or any number of the
Warrants can be cancelled by the Company at any time during their exercise
term upon a minimum of thirty (30) days prior written notice mailed to the
registered holders of the Warrants to exercise their purchase rights between
the date of any notice of cancellation up to and including the cancellation
date given by the company. The notice period may be extended, at the
discretion of the Company, upon giving subsequent notice to the Warrant
Agent and to registered holders of the Warrants. Any holder who does not
exercise his Warrants prior to the date set for cancellation will forfeit his
right to purchase the Common Stock underlying the Warrants.
SECTION 6. Reservation of Shares; Listing; Payment of Taxes; etc.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock
as shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Common Stock which shall be issuable
upon exercise of Warrants shall be duly and validly issued and fully paid
and nonassessable and free from all taxes, liens and charges with respect to
the issue thereof, and that upon issuance, such shares shall be listed on each
national securities exchange, if any, on which the other shares of outstanding
Common Stock of the Company are then listed.
If any securities to be reserved for the purpose of exercise of
Warrants hereunder require registration with or approval of any governmen-
tal authority under any federal or state law, before such securities may be
validly issued or delivered upon such exercise, then the Company covenants
that it will, in good faith and as expeditiously as possible, endeavor to secure
such registration or approval, as the case may be, provided, however, that
the Company need not endeavor to seek such registration or approval in a
state in which the Warrants were not sold by the Company pursuant to the
Registration Statement unless an exemption from registration under such
state's laws is available or such registration or approval may be obtained
with reasonable efforts and expenses, and provided further, that Warrants
may not be exercised by, or shares of Common Stock issued to, any
Registered Holder in any state in which such exercise would be unlawful.
The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance
of Warrants, or the issuance or delivery of any shares upon exercise of the
said Warrants; provided, however, that if shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if
any.
The Warrant Agent, unless it is already acting as such, is hereby
irrevocably authorized to requisition the Transfer Agent from time to time
for certificates representing shares of Common Stock required upon exercise
of the Warrants, and the Company will authorize the Transfer Agent to
comply with all such requisitions. The Company will file with the Warrant
Agent a statement setting forth the name and address of the Transfer Agent
for shares of Common Stock or other capital stock issuable upon exercise of
the Warrants and of each successor Transfer Agent.
SECTION 7. Exchange and Registration of Transfer.
Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants or may be transferred
in whole or in part. Warrant Certificates to be so exchanged shall be
surrendered to the Warrant Agent at its Corporate Office, accompanied by
an Assignment, when necessary, and the Company shall execute and the
Warrant Agent shall countersign, issue and deliver in exchange therefor, the
Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
The Warrant Agent shall keep at such office, books in which, subject
to such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof. Upon due presentment for registration
of transfer of any Warrant Certificate at such office, the Company shall
execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
With respect to all Warrant Certificates presented for registration or
transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument
or instruments of transfer and subscription, in form satisfactory to the
Company and the Warrant Agent, duly executed by the Registered Holder
thereof or his or her attorney duly authorized in writing.
A service charge shall be made for any exchange or registration or
transfer of Warrant Certificates. In addition, the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith.
All Warrant Certificates so surrendered for exercise or for exchange
in case of mutilated Warrant Certificates shall be promptly cancelled by the
Warrant Agent and thereafter retained by the Warrant Agent until termina-
tion of the agency.
Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder
of any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
SECTION 8. Loss or Mutilation.
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership of and the loss, theft, destruction or
mutilation of any Warrant Certificate and (in the case of loss, theft or
destruction) of indemnity satisfactory to them, and (in the case of mutilation)
upon surrender and cancellation thereof, the Company shall execute and the
Warrant Agent shall countersign and deliver in lieu thereof, a new Warrant
Certificate representing an equal aggregate number of Warrants. Applicants
for a substitute Warrant Certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Warrant
Agent may prescribe.
SECTION 9. Adjustment of Purchase Price and Number of Shares
Deliverable After a Recapitalization or Restructuring of the Company.
(a) After each adjustment of the Purchase Price, pursuant to this Section 9,
the number of Common Stock purchasable upon the exercise of each
Warrant shall be the number derived by dividing such adjusted Purchase
Price into the original Purchase Price as defined in Section 1(f). In addition
to this Section 9, the Company's Board of Directors may, in its discretion,
reduce the applicable purchase price upon the giving of five (5) days prior
notice to the registered holders of the Warrants and to the Warrant Agent.
Such reductions shall not be subject to the adjustment provisions of this
Section 9.
(b) The Purchase Price shall be subject to adjustment as set forth below:
(i) In case the Company shall hereafter (A) pay a dividend or make a
distribution on its Common Stock in shares of its capital stock (whether
shares of Common Stock or of capital stock of any other class), (B)
subdivide its outstanding shares of Common Stock, (C) combine its
outstanding shares of Common Stock into a smaller number or shares, or (D)
issue by reclassification of its shares of Common Stock any shares of capital
stock of the Company, the Purchase Price in effect immediately prior to such
action shall be adjusted so that the Registered Holder of any Warrant
thereafter exercised shall be entitled to receive the number of shares of
capital stock of the Company which he or she would have owned immediate-
ly following such action had such Warrant been exercised immediately prior
thereto.
(ii) An adjustment made pursuant to this subsection shall become
effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision, combination, reclassification or issue. If, as a result of an
adjustment made pursuant to this subsection, the Registered Holder of any
Warrant thereafter exercised shall become entitled to receive shares of two
or more classes of capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a
statement filed with the Warrant Agent) shall determine the allocation of the
adjusted Purchase Price between or among shares of such classes of capital
stock.
(iii) No adjustment in the Purchase Price shall be required to be made
unless such adjustment would require an increase or decrease of at least
$.01; provided, however, that any adjustments, which by reason of this
subsection, are not required to be made, shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 9 shall be made to the earnest one-hundredth of a share, as the case
may be, but in no event shall the Company be obligated to issue fractional
shares upon the exercise of any Warrant.
(iv) In the event that at any time as a result of an adjustment made
pursuant to subsection (i) of this Section 9(b), the Registered Holder of any
Warrant thereafter exercised shall become entitled to receive any shares of
the Company other than shares of its Common Stock, thereafter the Purchase
price of such other shares so receivable upon exercise of any Warrant shall
be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to Common
Stock contained in subsections (i) through (iii) of this
Section 9(b).
(c) In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value
to par value or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation
(other than a merger with a Subsidiary in which merger the Company is the
continuing corporation and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital
stock issuable upon exercise of the Warrants [other than a change in par
value, or from par value to no par value, or from no par value to par value
or as a result of a subdivision or combination]) or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be,
shall make lawful and adequate provision whereby the Registered Holder of
each Warrant then outstanding shall have the right thereafter to receive on
exercise of such Warrant, the kind and amount of securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a Holder of the number of securities issuable upon exercise
of such Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and shall forthwith file at the
Corporate Office of the Warrant Agent, a statement signed by its Chief
Executive Officer, President or a Vice President and its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary evidencing such
provisions. Such provisions shall include provision for adjustment which
shall be as nearrly equivalent as may be practicable to the adjustments
provided for in Section 9(b). The above provisions of this Section 9(c)
shall similarly apply to the successive reclassifications and changes of shares
of Common Stock and to successive consolidations, mergers, sales or
conveyances.
(d) Before taking any action which would cause an adjustment
reducing the Purchase Price below the then par value of the shares of
Common Stock issuable upon exercise of the Warrants, the Company will
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable shares of such Common Stock at such adjusted Purchase
Price.
(i) Upon any adjustment of the Purchase Price required to be made
pursuant to this Section 9, the Company within thirty (30) days thereafter
shall (A) cause to be filed with the Warrant Agent a certificate of a firm of
independent accountants setting forth the Purchase Price after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based, which certificate shall
be conclusive evidence of the correctness of such adjustment, and (B) cause
to be mailed to each of the Registered Holders of Warrant Certificates
written notice of such adjustment. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the provisions of Subsection
9(d)(ii).
(ii) In case at any time:
(A) The Company shall declare any dividend upon its Common
Stock payable otherwise than in cash or in Common Stock of the Company;
or
(B) The Company shall offer for subscription to all the holders
of its Common Stock, but not to the public generally, any additional shares
of stock of any class or any other securities convertible into shares of stock
or any rights to subscribe therefore; or
(C) There shall be any capital reorganization or reclassification of the
capital stock of the Company, or a sale of all or substantially all of the
assets of the Company, or a consolidation or merger of the Company with
another corporation (other than a merger with a Subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification or change of the then outstanding shares of Common Stock
or other capital stock issuable upon exercise of the Warrants [other than a
change in par value, or from par value to no par value, or from no par value
to par value, or as a result of subdivision or combination]); or
(D) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in any one or more of said
cases, the Company shall cause to be mailed to each of the Registered
Holders of Warrants, at the earliest practicable time (and, in any event, not
less than twenty (20) days before any record date or other date set for
definitive action), written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribu-
tion or subscription rights or such reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up shall taken
place, as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent that such effect may be
known at the date of such notice) on the Purchase Price and the kind and
amount of the shares of stock and other securities and property deliverable
upon exercise of the Warrants. Such notice shall also specify the date as of
which the holders of the Common Stock of record shall participate in said
dividend, distribution or subscription rights or shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event
of voluntary or involuntary dissolution, liquidation or winding up of the
Company, the right to exercise the Warrants shall terminate).
(iii) Without limiting the obligation of the Company to provide notice to
the Registered Holders of corporation actions hereunder, it is agreed that
failure of the Company to give notice shall not invalidate such corporation
action of the Company.
SECTION 10. Concerning the Warrant Agent.
The Warrant Agent acts hereunder as agent and in a ministerial
capacity for the Company, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not, by issuing and delivering
Warrant Certificates or by any other act hereunder, be deemed to make any
representations as to the validity or value or authorization of the Warrant
Certificate or the Warrants represented thereby or of any securities or other
property delivered upon exercise of any Warrant or whether any stock issued
upon exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time (i) be liable for any recital
or statement of fact contained herein or for any action taken, suffered or
omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties, (ii) be responsible for any
failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omissions in connection with this Agreement except
for its own negligence or willful misconduct.
The Warrant Agent may at any time consult with counsel for the
Company and shall incur no liability or responsibility for any action taken,
suffered or omitted by it in good faith in accordance with the option or
advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument
signed by its Chief Executive Officer, President, a Vice President, its
Treasurer, an Assistant Treasurer, its Secretary, or an Assistant Secretary
(unless other evidence in respect thereof is herein specifically prescribed).
The Warrant Agent shall not be liable for any action taken, suffered or
omitted by it in accordance with such notice, statement, instruction, request,
direction, order or demand.
The Company agrees to pay the Warrant Agent reasonable compensa-
tion for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except
losses, expenses and liabilities arising as a result of the Warrant Agent's
negligence or willful misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or willful misconduct), after giving
thirty (30) days prior written notice to the Company. At least fifteen (15)
days prior to the date, such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense.
Upon such resignation, the company shall appoint in writing, a new warrant
agent. If the company shall fail to make such appointment within a period
of thirty (30) days after it has been notified in writing of such resignation
by the resigning Warrant Agent, then the Registered Holder of any Warrant
Certificate may apply in any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether
appointed by the Company or by such a court, shall be a bank or trust
company having a capital and surplus, as shown by its last published report
of its stockholders, of not less than $1,000,000 or a stock transfer company
doing business in the Denver, Colorado, metropolitan area. After acceptance
in writing of such appointment by the new warrant agent is received by the
Company, such new warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein
as the warrant agent, without any further assurance, conveyance, act or deed;
but if for any reason it shall be necessary or expedient to execute and deliver
any further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and
delivered by the resigning Warrant Agent. Not later than the effective date
of any such appointment, the Company shall file notice thereof with the
resigning Warrant Agent and shall forthwith cause a copy of such notice to
be mailed to the Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be
a party or any corporation succeeding to the corporate trust business of the
Warrant Agent shall be a successor warrant agent under this Agreement
without any further act, provided that such corporation is eligible for
appointment as successor to the Warrant Agent under the provisions of the
preceding paragraph. Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not the
Warrant Agent. Nothing herein shall preclude the Warrant Agent from
acting in any capacity for the Company or for any other legal entity.
The Warrant Agent and the Company may by supplemental
agreement, make any changes or corrections in this Agreement (i) that they
shall deem appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained; or (ii)
that they may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Warrant Certificates; provided, however,
that this Agreement shall not otherwise be modified, supplemented or altered
in any respect except with the consent in writing of the Registered Holders
of Warrant Certificates representing not less than 50% of the Warrants then
outstanding; and provided, further, that no change in the number or nature
of the securities purchasable upon the exercise of any Warrant, or an
increase in the Purchase Price therefor, or the acceleration of the applicable
Warrant Expiration Date, shall be made without the consent in writing of the
Registered Holders of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this Agreement as
originally executed.
SECTION 12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered
or mailed, first-class postage prepaid, or delivered to a telegraph office for
transmissions: if to the Registered Holder of the Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the
Warrant Agent; if to the Company, at c/o Frascona, Joiner and Goodman,
P.C., 4750 Table Mesa Drive, Boulder, Colorado 80303, Attention: Gary S.
Joiner, or at such other address as may have been furnished to the Warrant
Agent in writing by the Company, in each case with a copy at the same time
to Frascona, Joiner and Goodman, P.C., Attention: Gary S. Joiner, Esq.,
4750 Table Mesa Drive, Boulder, Colorado 80303-5575; and, if to the
Warrant Agent, at the Corporate office.
SECTION 13. Governing law.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns,
and the Registered Holders from time to time of Warrant Certificates or any
of them. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim or to impose upon
any other person any duty, liability or obligation.
SECTION 15. Counterparts.
This Agreement may be executed in several counterparts, which
taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be duly executed as of the date first above written.
BUFFALO CAPITAL IV, LTD.
By:____________________________
Its: President
BUFFALO CAPITAL IV, LTD.,
as Warrant Agent
By:___________________________
Its: President
EXHIBIT 3.2 - SPECIMEN STOCK CERTIFICATE
CONTENTS:
State of Incorporation
Name of Company
Number of authorized shares of common stock
Name of Individual Shareholder
Number of shares owned by individual shareholder
Fully paid and non-assessable shares
Date of issuance of certificate
Signature of President
Restrictive transfer legend<PAGE>
EXHIBIT 3.3
SPECIMEN CLASS A WARRANT AND
CLASS B WARRANT CERTIFICATES
WARRANT CERTIFICATE NO ____
CANCELABLE WARRANT NO. W-A___
_______ CANCELABLE WARRANTS
BUFFALO CAPITAL IV, LTD.
(a Colorado corporation)
CANCELABLE WARRANT CERTIFICATE
For the Purchase of Common Stock
CUSIP __________________
THIS CERTIFIES THAT, for value received, ____________________
________________________________________________________
________________________________________________________
("Warrantholder"), is the registered owner of the above-stated number of
Cancelable Class A Warrants ("Cancelable Warrants") of BUFFALO
CAPITAL IV, LTD., a Colorado corporation ("Company"), expiring on
December 31, 2002, unless canceled or extended ("Expiration Date").
Subject to cancellation and other limitations as described below, each
Cancelable Warrant entitles the Warrantholder to purchase one share of the
common stock no par value ("Common Stock" or "Shares"), of the
Company, at a purchase price of $2.00 per Share ("Exercise Price"), at any
time beginning January 1, 1997 and until to the Expiration Date, upon
surrender of this Certificate with the exercise form on the reverse side hereof
duly completed and executed, accompanied by payment of the Exercise
Price, to, ("Warrant Agent"), This Certificate and exercise of these
Cancelable Warrants will be subject to the provisions of the Warrant Agent
Agreement dated _____________, 1996, ("Warrant Agreement"), between
the Company and the Warrant Agent, to which provisions the Warrantholder
agrees by acceptance of this Certificate. The provisions of the Warrant
Agreement and those set forth on the reverse side of this Certificate are fully
incorporated by reference into this Certificate as if fully set forth herein.
If all Cancelable Warrants represented by this Certificate
shall not have been duly exercised on or before the Expiration Date, as it
may be extended, the unexercised Cancelable Warrants shall expire and this
Certificate shall become void. The Expiration Date may be extended from
time to time for an indefinite period, or the Exercise Price may be reduced,
at the discretion of the Company upon giving notice thereof to the Warrant
Agent and giving subsequent notice thereof to holders of Cancelable
Warrants then listed on its books.
The Warrantholder may exercise all or any of the Cancelable
Warrants in the manner and during the period stated above, but only for an
even number of Shares if less than all are exercised, upon due presentment
of this Certificate to the Warrant Agent. The Exercise Price must be paid
in lawful money of the United States of America, in cash or by personal
check, bank check or certified check payable to the order of the Company.
If fewer than all of the above number of Cancelable Warrants are exercised,
the Warrant Agent shall execute and deliver to the Warrantholder a new
Cancelable Class A Warrant certificate of like tenor evidencing the number
of Cancelable Warrants not exercised. Should any or all the Cancelable
Warrants be assigned, then upon due presentment of this Certificate by the
assignee to the Warrant Agent accompanied by payment of the sum of
$10.00 per Cancelable Class A Warrant certificate to be issued and of all
transfer taxes and other governmental charges due, if any, the Warrant Agent
shall transfer the Cancelable Warrants assigned on the transfer books and
shall (subject to the Warrant Agreement) execute and deliver to the assignee
a Cancelable Class A Warrant certificate of like tenor representing the
number of Cancelable Warrants assigned, and if less than all of the
Cancelable Warrants are assigned, execute and deliver to the Warrantholder
a Cancelable Class A Warrant certificate of like tenor representing the
number of Cancelable Warrants not assigned.
The Company may cancel these Cancelable Warrants at any
time upon at least thirty days' prior written notice to holders of Cancelable
Warrants then listed on its books, at any time that a current registration
statement is in effect. This notice shall accelerate the Expiration Date,
which shall become the last day of the cancellation period, and the
Cancelable Warrants may be exercised on or before the accelerated
Expiration Date. Cancelable Warrants not exercised timely shall expire and
this Certificate shall become void. The cancellation prior (and the
accelerated Expiration Date) may be extended by the Company upon two
days' written notice to the Warrant Agent and giving subsequent notice
thereof to holders of Cancelable Warrants then listed on its books.
The Cancelable Warrants may be exercised, or canceled in
accordance with the immediately proceeding paragraph, only if a current
prospectus is then in effect. The Company has undertaken to use its best
efforts to maintain a current prospectus at any time during which the market
bid price for the Common Stock exceeds the Exercise Price, but is not
obligated to do so.
In addition, should management of a business opportunity
that is the target of a business combination with the Company require, as a
condition to the consummation of the business combination, that the
Cancelable Warrants be canceled, the Cancelable Warrants may be canceled
by the Company under the terms set forth in Section 5(a) of the Warrant
Agreement without prior written notice to the registered holders of the
Cancelable Warrants and without any right on the part of such holders to
exercise the Cancelable Warrants prior to cancellation. The Company may
cancel the Cancelable Warrants under these limited circumstances irrespec-
tive of whether a current registration statement is then in effect.
The Company's power to cancel the Cancelable Warrants in accordance with
Section 5(a) of the Warrant Agreement shall expire upon the Company's
consummation of a business combination. UNTIL THE CANCELABLE
WARRANTS ARE NO LONGER SUBJECT TO CANCELLATION
UNDER SECTION 5(a) OF THE WARRANT AGREEMENT, THE
CANCELABLE WARRANTS MAY NOT BE TRANSFERRED ON THE
RECORDS OF THE COMPANY.
These Cancelable Warrants shall not entitle the Warrant-
holder to any of the rights of stockholders or to any dividend declared upon
the Common Stock unless the Warrantholder shall have exercised these
Cancelable Warrants and purchased the Shares of Common Stock prior to
the record date fixed by the Board of Directors of the Company for the
determination of holders of Common Stock entitled to such dividend or
other right. Holders of Cancelable Warrants are protected against dilution
of their interests represented by the underlying shares of Common Stock
upon the occurrence of stock dividends, stock splits or reclassifications of
the Common Stock, as provided in the Warrant Agreement.
This Certificate shall not be valid unless countersigned by
the Warrant Agent.
WITNESS the facsimile seal of the Company and the
facsimile signature of its duly authorized officer.
Dated:______________________________
BUFFALO CAPITAL IV, LTD.
By:
Grant W.Peck, President
By:
Dean F. Sessions, Secretary
COUNTERSIGNED:
By:___________________________
Warrant Agent
Authorized Signature<PAGE>
EXHIBIT 3.4 - CANCELABLE WARRANT SUBSCRIPTION FORM
BUFFALO CAPITAL IV, LTD.
Date: ____________________, 19____
The Undersigned hereby elects irrevocably to exercise the within
Cancelable Warrant and to purchase _____________ shares of Common
Stock of the Company called for thereby, and hereby makes payment of
$_____________ (at the rate of $2.00 per share of Common Stock) payable
to Buffalo Capital IV, Ltd. in payment of the Exercise Price pursuant thereto
and, if such number of shares shall not be all of the shares purchasable
hereunder, directs that a new Cancelable Warrant Certificate of like tenor for
the balance of the remaining shares purchasable hereunder be delivered to
the undersigned at the address stated below. Please issue the shares of
Common Stock as to which this Cancelable Warrant is exercised in
accordance with the instructions given below.
Signature:
Signature Guaranteed:
By:
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
(Print in Block Letters)
Address
ASSIGNMENT
(To be executed by the registered Holder
to effect a transfer of the within Warrant)
FOR VALUE RECEIVED, _______________________________ does
hereby sell, assign and transfer unto __________________-
________________________ the right to purchase _____________ shares
of the Common Stock of the Company evidenced by the within Warrant, and
does hereby irrevocably constitute and appoint ________________________-
_____ attorney to transfer such right on the books of the Company with full
power of substitution in the premises.
Dated:____________________, 19____
Signature:
Signature Guaranteed:
By:
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 3,731
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,731
<PP&E> 0
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<TOTAL-ASSETS> 3,986
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<BONDS> 0
0
0
<COMMON> 7,500
<OTHER-SE> 60,450
<TOTAL-LIABILITY-AND-EQUITY> 3,986
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 63,964
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (63,964)
<INCOME-TAX> 0
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