U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities
Exchange Act of 1934
SUNBURST ACQUISITIONS II, INC.
(Name of Small Business Issuer in its charter)
Colorado 84-1388857
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4807 South Zang Way, Morrison, Colorado 80465
(Address of Principal Office) Zip Code
Issuer's telephone number: (303) 979-2404
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)
Series A Convertible Preferred Stock
(Title of class)
<PAGE>
PART I
Item 1. Description of Business.
General
Sunburst Acquisitions II, Inc. (the "Company") was incorporated
under the laws of the State of Colorado on March 17, 1997, 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's 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. Prior to the effective date of this registration statement, it
is anticipated that the Company's officers, directors, and affiliates 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. 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 of
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 further 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 affiliates,
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
requirements 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 circumstances, 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
purchasing, 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 4807 S.
Zang Way, Morrison, Colorado 80465, which is the office address of
its President. The Company's telephone number there is (303) 979-
2404. 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
one other blind pool or blank check company 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 other
blind pool or blank check company which was which formed at the same
time as the Company and has an identical structure and business plan
does 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
March of 1997 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 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
dividends 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
issue 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 and the outstanding shares of Class A Convertible Preferred 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 shares 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 two 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. A total of 1,899,000 shares of common stock
held by present stockholders of the Company, 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. The 80,000 shares of Class A Convertible
Preferred Stock, and the shares of common stock into which such shares
may be converted, will become available for resale starting in February,
1998.
W. 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 net proceeds
in the amount of $8,000 from its inside capitalization funds.
Consequently, the Company's balance sheet for the period ending April
30, 1997, reflects a current asset value of $5,477 and a total asset value
of $5,777, 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 March 17, 1997 (inception) through April
30, 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. Accordingly, there can be no
assurance that any additional funds will be available to the Company to
allow it to cover its expenses.
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 does not currently maintain an office or any other
facilities. It does currently maintain a mailing address at 4807 S. Zang
Way, Morrison, Colorado 80465, which is the address of its President.
The Company pays no rent for the use of this mailing address. 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) 979-2404.
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>
Michael R. Quinn<F1>
2082 Cherry Street
Denver, Colorado 80207 708,500<F2> 36.61%
Jay Lutsky<F1>
4807 S. Zang Way
Morrison, Colorado 80465 710,500<F2> 36.72%
John Marvin
32721 Meadow Mountain Rd.
Evergreen, Col. 80439 195,000<F2> 10.07%
All directors and executive
officers (3 persons) 1,614,000 83.41%
<FN>
<F1> The person listed is an officer and a director of the Company.
<F2> Does not include 5,000 shares of Series A Convertible Preferred Stock
owned by each such person, each of which is convertible into two shares of
common stock at any time on or after August 31, 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
Michael R. Quinn 73 President and Director
Jay Lutsky 54 Secretary/Treasurer and Director
John Marvin 47 Vice President and Director
</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.
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.
Biographical Information
MICHAEL R. QUINN
Mr. Quinn has served as President and as a Director of the
Company since its inception. He has been involved with several
development stage companies. He consults with companies
contemplating trading publicly and his services consist of corporate
structuring, management, accounting, productions, sales, etc.
Over the last six years, Mr. Quinn has served as a consultant to
equity holders involved in a bankruptcy case, as a consultant and lead
plaintiff in three lawsuits, all of which have resulted in favorable
decisions for the plaintiff.
He served as President, Treasurer and Director of O.T.C. Capital
Corporation ("OTC"). OTC acquired Capital 2000 and is currently
actively trading. He was a founder of American Leverage, Inc., and
was its Secretary/Treasurer and a Director until American Leverage, Inc.
acquired Data National Corporation ("Data"). Data is active, profitable
and in a growth mode. Currently, Mr. Quinn is the President and
Treasurer of Gatwick, Ltd. ("Gatwick"). Gatwick is actively seeking a
qualified target for a merger candidate.
JAY LUTSKY
Mr. Lutsky has served as Treasurer and Director of the Company
since its inception. From 1968 to 1974, Mr. Lutsky was employed at
United Bank of Denver in various management positions, including
Guaranteed Check Manager, Corporate Programs Manager and
Executive Lending Officer. From April 1974 through April 1980, Mr.
Lutsky was involved in the publishing and ski promotions business,
serving as President of Mountain States Ski Association, a company he
helped to start. From August 1983 through September 1985, Mr.
Lutsky worked in the positions of General Manager of the SumFun
Program, Regional marketing Manager, and Investor Relations Manager
for Gold C Enterprises, Inc., a publicly-traded Colorado corporation that
published discount coupon books. Since May of 1980, Mr. Lutsky has
done business as Dolphin & Associates, a private consulting firm and he
has managed his personal investment portfolio.
Mr. Lutsky has served on the board and been president of several
public companies. From December 1986 through May, 1990, Mr.
Lutsky served as president of Eagle Venture Acquisitions, Inc.
("Eagle"). Eagle merged with Network Financial Services, Inc.
("Network") in May 1990. Mr. Lutsky continued on the board of
Network which traded on the NASDAQ system until December,
1993. Mr. Lutsky was a vice-president and served on the board of
Starlight Acquisitions, Inc. ("Starlight") a blank check offering.
Starlight merged with Toucan Gold Corporation ("Toucan"), TUGO-
Bulletin Board, on May 10, 1996. Mr. Lutsky now serves as an advisor
to the current board of directors of Toucan. Mr. Lutsky also currently
serves on the board of directors of Gatwick, Ltd., a Regulation A public
company.
He earned a Bachelor of Science degree from Kent State
University in 1967.
JOHN B. MARVIN
Mr. Marvin served as Vice President and Director of Starwood
Investments, Inc., a Colorado corporation involved in entrepreneurial
activities in real estate, oil and gas, and small business, form April 1986
to February, 1991. Mr. Marvin also served as Vice President and a
Director of Universal Treating Company, Inc., an oil well service
company in Levelland, Texas, from October 1987, to November 1992.
He is currently self-employed as a consultant providing oil and gas
drilling and engineering services in the oil and gas industry.
Mr. Marvin served on the board of directors of Starwood
Acquisitions, Inc. from July, 1988 to May, 17, 1989. Starwood
Acquisitions, Inc. merged with Cine-Source, Inc. a film production and
distribution company. Mr. Marvin also served as a director of Starlight
Acquisitions, Inc. from January 1989 to May 10, 1996. Starlight
Acquisitions merged with Toucan Gold Company, symbol TUGO, which
trades on the bulletin board.
Mr. Marvin received his Bachelor of Science degree in
Engineering from the U.S. Military Academy at West Point in 1972. He
received his MBA in Finance from the University of Utah in 1976.
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of
Incorporation 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 is also currently an officer, director and
shareholder of Sunburst Acquisitions I, Inc., which is also a public shell
corporation. The Company and this other entity will be in competition
with each other for prospective companies to acquire. See "Conflicts of
Interest" below.
The officers and directors of the Company have each been
involved in other blind pool activities in the past and 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 is also an officer
and director of one other development-stage corporation in the same
business as the Company. See "Other Blind Pool Activities." These two
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 pools 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 other blind-pool company described herein, have the
same shareholders. It is also anticipated that both 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 the other
blind-pool company, until they have completed the acquisition of a
business opportunity, the possibility of claims by a shareholder of the
Company, or of the other blind pool company, 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 $0.001 per share, and the total purchase price for
all presently issued and outstanding shares, including both common stock
of Series A Convertible Preferred Stock was $9,935, of which $8,000
was paid in cash and $1,935 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, two of the Company's directors
received 727,500 shares of common stock, and the third director
received 195,000 shares of common stock valued at $0.001 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. No officer or director has received any other remuneration.
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 has employed the law firm of Frascona, Joiner &
Goodman, P.C., in which one of its 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.
Prior to the date of this Prospectus, the Company issued to its
officers, directors, and others a total of 1,935,000 shares of Common
Stock, valued at $0.001 per share, or an aggregate total of $1,935, for
services rendered to the Company. The company also sold a total of
80,000 shares of its Series A Convertible Preferred Stock at a price of
$0.10 per share. Each share of Series A Convertible Preferred Stock is
convertible into two shares of common stock on or after August 31,
1997. Upon conversion of the outstanding Series A Convertible
Preferred Stock to common stock, the effective price per share of
common stock paid by the persons who purchased preferred stock will
be $0.05 per share. 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."
On or about May 30, 1997, two of the officers and directors of
the company made gifts of a portion of their common shares to various
friends and family members. Michael R. Quinn transferred a total of
19,000 shares to 88 people, and Jay Lutsky transferred a total of 17,000
shares to 17 people. The shares which were transferred by gift are
considered restricted securities in the hands of the donees.
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 a mailing address 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 Series A Convertible Preferred Stock 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 20,000,000 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. The board of
directors has authorized the issuance of 80,000 shares of Series A
Convertible Preferred Stock. This Series A Convertible Preferred Stock
is redeemable in whole or in part, at the option of the Company, at a
redemption price of $0.15 per share, plus accrued and unpaid dividends,
at any time after the earlier of March 1, 1999, or the date upon which
the Company completed a merger, acquisition, reorganization or other
transaction resulting in a change of control. Each share of Series A
Convertible Preferred Stock has a preferential liquidation value of $0.10
per share, and is convertible at the option of the holder into two shares
of common stock at any time on or after August 31, 1997. No dividends
are payable on the Series A Convertible Preferred Stock on or before
March 1, 1999. Thereafter, dividends equal to $0.01 per annum per
share are payable quarterly in arrears when and as declared by the board
of directors. Payment of dividends on the Series A Convertible
Preferred Stock is preferred and has priority over payment of dividends
on the outstanding common stock of the Company. Holders of Series A
Convertible Preferred Stock have no voting rights.
Reports to Stockholders
The Company plans to furnish its stockholders with an annual
report for each fiscal year ending April 30 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 111 holders of record of the Company's common stock
on June 1, 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 five percent (5%) 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 March 17, 1997 (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:
<PAGE>
<TABLE>
<CAPTION>
Name Date of Shares Aggregate Price
Sale Purchase Per
Price Share
<S> <C> <C> <C> <C>
Jay Lutsky 2/25/97 727,500 727.50<F1> 0.001
Michael R. Quinn 2/25/97 727,500 727.50<F1> 0.001
John B. Marvin 2/25/97 195,000 195.00<F1> 0.001
Gary S. Joiner 2/25/97 95,000 95.00<F1> 0.001
Grant W. Peck 2/25/97 95,000 95.00<F1> 0.001
Dean F. Sessions 2/25/97 95,000 95.00<F1> 0.001
<FN>
<F1> 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.
</FN>
</TABLE>
Since March 17, 1997 (date of the Company's formation), the
Company has sold its Series A Convertible Preferred Stock to the
persons listed in the table below in transaction summarized as follows:
<TABLE>
<CAPTION>
Name Date of Shares Aggregate Price
Sale Purchase Per
Price Share
<S> <C> <C> <C> <C>
Michael R. Quinn 2/28/97 5,000 500 0.10
Jay Lutsky 2/28/97 5,000 500 0.10
John B. Marvin 2/28/97 5,000 500 0.10
Jerry Hughes 2/28/97 15,000 1,500 0.10
R. Gerald Spehar
and Susan M. Spehar,
Joint Tenants 2/28/97 15,000 1,500 0.10
Clayton Wood 2/28/97 15,000 1,500 0.10
Kip Pedrie 2/28/97 10,000 1,000 0.10
William Drubel 2/28/97 5,000 500 0.10
Ronald Como 2/28/97 5,000 500 0.10
</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.<PAGE>
SUNBURST ACQUISITIONS II, INC.
INDEX TO FINANCIAL STATEMENTS
Report of 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 CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors and Stockholders of
Sunburst Acquisitions II, Inc.
We have audited the accompanying balance sheet of Sunburst
Acquisitions II, Inc. (a development stage company) as of April 30,
1997, and the related statement of loss and accumulated deficit,
stockholders' equity, and cash flows for the period from inception
(March 17, 1997) to April 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 Sunburst Acquisitions
II, Inc., as of April 30, 1997, and the results of its operations and its
cash flows for the initial period then ended in conformity with generally
accepted accounting principles.
Comiskey & Co.
A Professional Corporation
Aurora, Colorado
May 14, 1997<PAGE>
SUNBURST ACQUISITIONS II, INC.
(A Development Stage Company)
BALANCE SHEET
April 30, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 5,477
Prepaid legal fees -
TOTAL CURRENT ASSETS 5,477
OTHER ASSETS
Organizational costs (net) 300
Total Other Assets 300
TOTAL ASSETS 5,777
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable -
Accounts payable - related party 273
Total current liabilities 273
STOCKHOLDERS' EQUITY
Preferred stock, no par value
20,000,000 shares authorized;
80,000 shares issued and outstanding 8,000
Common stock, no par value
100,000,000 shares authorized;
1,935,000 shares issued and
outstanding 1,935
Deficit accumulated during the
development stage (4,431)
Total stockholders' equity 5,504
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 5,777
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS II, INC.
(A Development Stage Company)
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
For the period from inception (March 17, 1997)
to April 30, 1997
<TABLE>
<CAPTION>
<S> <C>
REVENUES -
EXPENSES
Legal and accounting 2,473
Office expense 23
Consulting fees 1,935
Total expenses 4,431
NET LOSS (4,431)
Accumulated deficit
Balance, beginning of period -
Balance, end of period (4,431)
NET LOSS PER SHARE (NIL)
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK AND COMMON STOCK
EQUIVALENTS OUTSTANDING 2,095,000
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS II, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (March 17, 1997) to April 30, 1997
<TABLE>
<CAPTION>
Deficit
accumulated
Stock during the Total
Number of development stockholders'
shares Amount stage equity
<S> <C> <C> <C> <C>
Preferred stock issued for
cash, April 1997
at $0.10 per share 80,000 8,000 8,000
Common stock issued for
services, February 1997
at $.0001 per
share 1,935,000 1,935 1,935
Net loss for the period
April 30, 1997 (4,431) (4,431)
Balance, April 30, 1997 5,504
Preferred stock 80,000 8,000
Common stock 1,935,000 1,935
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS II, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the period from inception (March 17, 1997)
to April 30, 1997
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Loss (4,431)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Stock issued for consulting fees 1,935
Decrease (increase) in prepaid
legal fees -
Increase (decrease) in accounts
payable - related party 273
Net cash used by
operating activities (2,223)
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs (300)
Net cash used by
investing activities (300)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of preferred stock 8,000
Net cash provided by
financing activities 8,000
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,477
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -
CASH AND CASH EQUIVALENTS,
END OF PERIOD 5,477
</TABLE>
The accompanying notes are an integral part of the financial statements.<PAGE>
SUNBURST ACQUISITIONS II, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company.
SUNBURST ACQUISITIONS II, INC. (a development stage
company) (the "Company") was incorporated under the laws of the State
of Colorado on March 17, 1997. The initial principal office of the
corporation is 4807 South Zang Way, Morrison, Colorado 80465.
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 no 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 fiscal year of the corporation shall be established by the board of
directors.
Loss per share
Loss per share was computed using the weighted average number of
common shares and common share equivalents outstanding during the
period.
Organizational costs
Costs to incorporate the Company have been capitalized and will be
amortized over a sixty-month period.
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.
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 month or less to be cash equivalents.
2. STOCKHOLDERS' EQUITY
As of April 30, 1997, 1,935,000 shares of the Company's no par
value common stock had been issued for consulting services provided.
The services were converted to shares at $0.001 per share.
As of April 30, 1997, 80,000 shares of the Company's no par
value Series A preferred stock had been issued at $0.10 per share.
Commencing on March 31, 1999, the holders of record of shares
of this Series A preferred stock shall be entitled to receive, when and as
declared by the board of directors out of funds legally available therefor,
cash dividends at the rate of $0.01 per share per annum, payable
quarterly, in arrears, on such dates as may from time to time be
determined by the board of directors.
In the event of a liquidation, dissolution or winding up of the
Corporation, the holders of shares of this Series A shall be entitled to
receive out of the assets of the Corporation an amount equal to $0.10 per
share, plus any accrued and unpaid dividends thereon to the date fixed
for distribution. This distribution shall be in preference and have
priority over any such distribution upon the common stock of the
Corporation and all other preferred holders of this Series A and of all
such other Series shall share ratably in any such distribution of assets in
accordance with the amounts which would be payable on such
distribution if the amounts to which the holders of this and all such other
Series are entitled were paid in full.
To the extent not previously converted into shares of common
stock, this Series A may be redeemed, in whole or in part, at the option
of the Corporation by resolution of its board of directors at a redemption
price per share of $0.15, plus any accrued and unpaid dividends thereon
to the date fixed for redemption.
The holders of shares of this Series A shall have the right, at
their option, to convert such shares into fully paid and nonassessable
shares of common stock of the Corporation at any time on or after
September 20, 1997. Each outstanding share of this Series A shall be
convertible into two shares of common stock of the Corporation.
The holders of this Series A shall have no right to vote either in
the election of directors or in any other matter.
3. RELATED PARTY TRANSACTIONS
As of the date hereof, Michael R. Quinn, Jay Lutsky, and John
Marvin are the officers and directors of the Company, and are the
owners of 1,650,000 shares of its issued and outstanding common stock,
constituting approximately 85% of the Company's issued and outstanding
common stock. If the purchaser of the Series A shares exercise the
conversion privilege, Jay Lutsky, Michael R. Quinn, and John Marvin
will own 1,680,000 shares constituting approximately 80% of the
Company's issued and outstanding shares.
The accounts payable of $273 is due to Gary Joiner, corporate
counsel and one of the principle shareholders of the Company.
The Company's President is providing office space 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 use.
4. INCOME TAXES
The Company has a Federal net operating loss carryforwards of
approximately $4,400 expiring in the year 2012. The tax benefit of
these net operating losses, which totals approximately $853, 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 April 30, 1997 the valuation
allowance increased by $853.
5. SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
During the year ended April 30, 1997, the Company elected not
to accumulate any amortization of the organization costs, a one month
amortization is immaterial to the financial statements taken as a whole.
Similarly, the Company elected to forego any rent expense for the
year ended April 30, 1997, but will begin recording the rent expense as
additional paid-in capital during the year ended April 30, 1998.
<PAGE>
PART III
Item 1. Index to Exhibits
The Exhibits listed below are filed as part of this Registration
Statement.
Exhibit
No. Document
2.1 Articles of Incorporation
2.2 Bylaws
3.1 Specimen Common Stock Certificate
3.2 Specimen Class A Convertible Preferred Stock Certificate
Item 2. Description of Exhibits.
<PAGE>
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.
SUNBURST ACQUISITIONS II, INC.
By: /s/ MICHAEL R. QUINN
President and Director
(Principal Executive Officer)
Date: June 6, 1997
By: /s/ JAY LUTSKY
Secretary, Treasurer and Director
(Principal Financial Officer)
Date: June 6, 1997
By: /s/ JOHN MARVIN
Vice President and Director
(Officer)
Date: June 6, 1997
<PAGE>
U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SUNBURST ACQUISITIONS II, INC.
(Name of Small Business Issuer in its charter)
Colorado 84-1388857
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4807 S. Zang Way, Morrison, Colorado 80465
(Address of principal executive offices)
Issuer's telephone number, (303) 979-2404
EXHIBIT INDEX
Exhibit
No. Document
2.1 Articles of Incorporation
2.2 Bylaws
3.1 Specimen Common Stock Certificate
3.2 Specimen Series A Convertible Preferred Stock Certificate
<PAGE>
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
SUNBURST ACQUISITIONS II, INC.
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 Incorporation:
FIRST: The name of the corporation is SUNBURST
ACQUISITIONS II, INC.
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 twenty million (120,000,000)
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. 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 twenty
million (20,000,000) 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.
D. Series A Convertible Preferred Stock. A class of
preferred stock designated as the Series A Convertible Preferred Stock
is hereby created out of the Preferred Stock authorized by these Articles
of Incorporation. The aggregate number of Series A Convertible
Preferred shares which this corporation shall have the authority to issue
is eighty thousand (80,000) shares, each with no par value, which shares
shall be designated "as the Series A Preferred Stock."
The preferences, limitations and relative rights of this Series A
Preferred Stock are as follows:
(1) Dividends.
Commencing on March 1, 1999, the holders of record of shares
of this Series A shall be entitled to receive, when and as declared by the
board of directors out of funds legally available therefor, cash dividends
at the rate of $0.01 per share per annum, payable quarterly, in arrears,
on such dates as may from time to time be determined by the board of
directors. The payment of dividends on this Series A shall be in
preference to and in priority over dividends upon the Common Stock of
the Corporation and all other shares of Preferred Stock of the
Corporation which are by their terms expressly made junior as to
dividends to this Series A, but subject to the prior rights of the holders
of shares of other Series of Preferred Stock of the Corporation which are
by their terms expressly made senior as to dividends to this Series A.
The holders of shares of this Series A shall not be entitled to any
dividends other than the cash dividends provided for in this Section 1.
No dividends shall be declared or paid on the Common Stock of the
Corporation during any period when the Corporation has failed to pay
a quarter-annual dividend on this Series A for any preceding quarter.
(2) Liquidation.
In the event of a liquidation, dissolution, or winding up of the
Corporation, the holders of shares of this Series A shall be entitled to
receive out of the assets of the Corporation an amount equal to $0.10 per
share, plus any accrued and unpaid dividends thereon to the date fixed
for distribution, in preference to and in priority over any such
distribution upon the Common Stock of the Corporation and all other
shares of Preferred Stock of the Corporation which are by their terms
expressly made junior as to liquidation preferences to this Series A, but
subject to the prior rights of the holders of shares of other Series of
Preferred Stock of the Corporation which are by their terms expressly
made senior as to liquidation preferences to this Series A. If the assets
of the Corporation are not sufficient to pay such amount in full to the
holders of this Series A and all other Series of Preferred Stock of the
Corporation ranking equally as to liquidation preferences with the shares
of this Series A, then the holders of this Series A and of all such other
Series shall share ratably in any such distribution of assets in accordance
with the amounts which would be payable on such distribution if the
amounts to which the holders of this and all such other Series are
entitled were paid in full.
(3) Redemption.
To the extent not previously converted into shares of common
stock, this Series A may be redeemed, in whole or in part, at the option
of the Corporation by resolution of its board of directors at a redemption
price per share of $0.15, plus any accrued and unpaid dividends thereon
to the date fixed for redemption, at any time and from time to time on
or after the earlier of (i) March 1, 1999, or (ii) the date upon which the
Corporation completes a merger, acquisition, reorganization or other
transaction resulting in a change of control. For purposes of the
foregoing, a change in control shall be deemed to have occurred at any
time that the combined stock ownership of Michael R. Quinn and Jay
Lutsky consists of less than 51% of all classes of the issued and
outstanding voting stock of the Corporation.
In the event that less than the entire number of the shares of this
Series A outstanding as of any redemption date is to be redeemed by the
Corporation at that time, the shares to be redeemed shall be selected by
lot in a manner determined by the board of directors of the Corporation.
Not less than ten, nor more than thirty days prior to the date
fixed for any redemption of this Series A or any part thereof, a notice
specifying the time and place of such redemption shall be given by first-
class mail, postage prepaid, to the holders of record of the shares of this
Series A selected for redemption at their respective addresses as the
same shall appear on the books of the Corporation, but no failure to mail
such notice or any defect therein or in the mailing thereof shall affect the
validity of the proceedings for redemption. Any notice which was
mailed in the manner herein provided shall be conclusively presumed to
have been duly given whether or not the holder receives the notice.
After the giving of any notice of redemption and prior to the
close of business on the date fixed for such redemption, the holders of
shares of this Series A called for redemption may convert such stock into
Common Stock of the Corporation in accordance with the conversion
privileges set forth in Section 5. After the date fixed for the redemption
of shares of this Series A by the Corporation, the holders of shares
selected for redemption shall cease to be stockholders, with respect to
such shares and shall have no interest in or claims against the
Corporation by virtue thereof and shall have no rights with respect to
such shares, except the right to receive the moneys payable upon such
redemption from the Corporation, without interest thereon, upon
surrender (and endorsement, if required by the corporation) of their
certificates, and the shares represented thereby shall no longer be
deemed to be outstanding.
(4) Conversion Privilege and Price.
The holders of shares of this Series A shall have the right, at
their option, to convert such shares into fully-paid and nonassessable
shares of Common Stock of the Corporation at any time on or after
August 31, 1997. Each outstanding share of this Series A shall be
convertible into two shares of Common Stock of the Corporation.
In case shares of this Series A are called for redemption by the
Corporation pursuant to Section 3, the right to convert such shares shall
cease and terminate at the close of business on the date fixed for
redemption by the Corporation.
(5) Conversion Procedure.
In order to convert shares of this Series A into Common Stock,
the holder shall surrender at the office of any transfer agent for this
Series A designated for that purpose by the board of directors, or at any
such other office as may be designated by the board of directors, the
certificate or certificates therefor, duly endorsed or assigned to the
Corporation or in blank, and shall give written notice to the Corporation
at said office that he elects to convert such shares. Shares of this Series
A surrendered for conversion during the period from the close of
business on any record date for the payment of a dividend on the shares
of this Series A to the opening of business on the date for payment of
such dividend shall (except in the case of shares of this Series A which
have been called for redemption by the Corporation pursuant to Section
3 on a date within such period) be accompanied by payment to the
Corporation of an amount equal to the dividend payable on such dividend
payment date on the shares of this Series A being surrendered for
conversion. Except as provided in the preceding sentence, no payment
or adjustment shall be made upon any conversion on account of any
dividends accrued on the shares of this Series A surrendered for
conversion or on account of any dividends on the Common Stock issued
upon conversion.
Shares of this Series A shall be deemed to have been converted
immediately prior to the close of business on the day of the surrender of
such shares for conversion in accordance with the foregoing provisions
and the person or persons entitled to receive the Common Stock issuable
upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Company shall issue and
shall deliver at said office a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion.
The Corporation will pay any and all documentary, stamp, or
similar taxes that may be payable in respect of the issuance or delivery
of shares of Common Stock on conversion of shares of this Series A.
The Corporation shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that in
which the shares of this Series A so converted were registered, and no
such issuance or delivery shall be made unless and until the person
requesting such issuance has paid to the Corporation the amount of any
such tax, or has established, to the satisfaction of the Corporation, that
such tax has been paid.
The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued Common
Stock, for the purpose of effecting the conversion of the shares of this
Series A, the full number of shares of Common Stock then deliverable
upon the conversion of all shares of this Series A then outstanding.
(6) Voting.
The holders of this Series A shall have no right to vote either in
the election of directors or in any other matter.
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). Three (3) 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
Michael R. Quinn
2082 Cherry Street
Denver, CO 80207
Jay Lutsky
4807 S. Zang Way
Morrison, CO 80465
John Marvin
32721 Meadow Mountain Road
Evergreen, CO 80439
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 4807 S. Zang Way, Morrison, CO 80465.
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 17th day of March, 1997.
/s/ Gary S. Joiner
Incorporator
Gary S. Joiner hereby consents to the appointment as the initial
registered agent for SUNBURST ACQUISITIONS II, INC.
/s/ Gary S. Joiner
Initial Registered Agent<PAGE>
EXHIBIT 2.2
BYLAWS
OF
SUNBURST ACQUISITIONS II, INC.
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
shareholder 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 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
shareholder 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 nevertheless 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 administrator,
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
appointment 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 III, 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 conveniently 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 instructions 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
uncertificated 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 corporation 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 corporation, 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 determination 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
proceeding 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 twenty-two (22)
pages, including this page, constitute the bylaws of SUNBURST
ACQUISITIONS II, INC. adopted by the board of directors of the
corporation as of March 17, 1997.
/s/ Jay Lutsky
Secretary<PAGE>
EXHIBIT 3.1 -
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 3.2 - SPECIMEN SERIES A CONVERTIBLE PREFERRED
STOCK CERTIFICATE
CONTENTS:
State of Incorporation
Name of Company
Description of series of preferred stock issued
Name of Individual Shareholder
Number of shares and description owned by individual shareholder
Fully paid and non-assessable shares
Date of issuance of certificate
Signature of Secretary and President
Statement regarding rights and preferences
Restrictive transfer legend
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> APR-30-1997
<CASH> 5,477
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,477
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,777
<CURRENT-LIABILITIES> 273
<BONDS> 0
0
8,000
<COMMON> 1,935
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,777
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,431
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,431)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,431)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
