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
Applied Capital Funding, Inc.
--------------------------------------------
(Name of Small Business Issuer in its charter)
Colorado 84-1280679
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4155 East Jewell Avenue, Suite #909
Denver, Colorado 80222
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (303) 691-6163
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
- --------------------------------- ----------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
------------------------------------------------------------
(Title of class)
<PAGE>
PART I
Alternative 3
Item 1. Description of Business.
(a) Business Development.
Applied Capital Funding, Inc. (hereinafter referred to as the "Company"),
was organized under the laws of the State of Colorado on September 26, 1994. The
Company's executive offices are presently located at 4155 East Jewell Avenue,
Suite #909, Denver, Colorado 80222, and its telephone number is (303) 691-6163.
In August 1997, the Company received a total of $27,400 from the sale of
13,700,000 shares of common stock, no par value per share (hereinafter referred
to as the "Common Stock"), to thirty-one residents of the State of Colorado in
an offering conducted by the executive officers and directors of the Company
pursuant to the exemptions from registration provided under Section 4(2) of the
Securities Act of 1933, as amended (hereinafter referred to as the "Act"), and
Section 11-51-308(1)(p) of the Colorado Securities Act, as amended (hereinafter
referred to as the "Colorado Act"). Additionally, the Company received a total
of $2,600 from the sale of an aggregate of 26 units, each unit consisting of
50,000 shares of Common Stock (an aggregate of 1,300,000 shares), to Colorado
residents and non-resident foreign nationals pursuant to an offering conducted
by the Company's executive officers and directors during the period from August
1 through September 10, 1997. The Company claimed the exemptions from
registration in connection with the offering provided under Section 3(b) of the
Act and Rule 504 of Regulation D promulgated thereunder and Section
11-51-308(1)(p) of the Colorado Act.
(b) Business of Issuer.
Since its inception, the Company has been engaged in the business of
residential mortgage brokerage; concentrating its marketing efforts in the areas
of refinance and second mortgage loans. To date, the Company has originated and
sold loans, primarily, to national wholesale lenders. Although management has
employed agents from time-to-time whose marketing efforts have been focused upon
realtors, attorneys and other traditional sources of residential loans; the
primary focus of the Company's marketing program has historically been refinance
and second mortgage loans. Accordingly, the Company's principal business has
historically been concentrated in the origination and processing of refinance
and second mortgage loans.
Commencing in 1994, residential interest rates began climbing over their
historic lows in 1993. This phenomenon is believed by management to have
contributed to the realization by the Company of a disappointing level of
revenue during the approximate three-year period since the Company's inception.
The Company has only nominal revenue currently. However, commencing in 1996,
residential interest rates began falling and, since that time, have continued
their downward movement. Although there is no assurance that interest rates will
continue at their present level or decline to lower rates, there is a general
prevailing opinion among economics experts that interest rates will not rise
before the close of 1997, at the earliest.
The Company's principals have experience in marketing residential refinance
loans and intend to implement a strategy to explore new marketing efforts.
Traditional marketing methods include newspaper advertising, direct mail and
telemarketing, and the executive officers and directors of the Company have
experience with these marketing methods. Over the past two years, the use of the
"Internet" in the origination and closing of loans has increased dramatically.
This development is due in part to the relaxation of traditional underwriting
criteria which has facilitated the origination of refinance and second mortgage
loans which previously relied on a slow and laborious process of acquiring
underwriting information. The Company intends to explore the "Internet"
marketing opportunities. In the event that the Company considers it advisable to
proceed with its proposed marketing program, management will explore
opportunities for raising additional capital via equity and/or debt financing to
further fund its operations.
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Presently, the Company has only two employees, including its President and
Secretary/Treasurer, who also serve as its loan officers. The Company's
President and Secretary/Treasurer expect to devote such time and effort as may
be necessary to participate in the day-to-day management of the Company. The
Company has no plans to employ any individuals except its two executive officers
on a part-time basis for the foreseeable future. Any needed administrative
services are currently free-lanced to a secretarial service or a temporary
secretary is employed. (See Item 6. "Executive Compensation.")
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
- ------------------
Since its inception on September 26, 1994, the Company has been engaged in
the mortgage lending business. For the fiscal years ended December 31, 1995 and
1996, and the nine and one-half-month period ended September 15, 1997, the
Company realized total revenue from operations in the amounts of $60,424,
$32,038 and $425, respectively, and net income (loss) in the amounts of
$(1,257), 989 and $(114), respectively. Management's plan of operation during
the next twelve months is to initiate a modest advertising campaign to seek
refinancing mortgage lending business. This advertising campaign will be
conducted in the media deemed most advantageous based upon the market analysis
described under Item 1 "Description of Business," (b) "Business of Isuer"
hereinabove.
The Company's business is substantially impacted by the ongoing fluctuation
in mortgage interest rates. As indicated above, the Company experienced a
decline in its mortgage refinance business during the period from 1994 to 1996
because of an increase in interest rates; thus resulting in a decline in the
demand for residential mortgage loans. This historical fluctuation in mortgage
business revenue -- increase when interest rates fall; decrease when interest
rates rise -- is an expected aspect of the mortgage business. Additionally,
general economic conditions have added impact upon the mortgage loan business.
In order to accommodate anticipated fluctuations in the level of the Company's
business activity caused by the above-described, among other, factors,
management seeks to condition itself to downsize operations in time of decline
and increase and expand during a rising market.
The operation of the Company's mortgage brokerage business is not cash
intensive. Its loan officers are compensated with modest salaries and
commissions based upon performance (see Item 6. "Executive Compensation).
Management believes that the Company's minimal level of business operations
currently will be sufficient to sustain its operations. Management is prepared,
however, to seek additional equity and/or debt financing, the availability of
which could not be assured, in order to expand and increase the level of the
Company's operations. This capital, if available, would be utilized for the
immediate, up-front costs of employing additional loan officers and support
staff for loan processing. At the present time, management is unable to predict
the number of additional employees which may be needed in the event of an
increase in its mortgage lending business in the future nor the costs associated
with any such increase in personnel.
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Financial Condition, Capital Resources and Liquidity
- ----------------------------------------------------
At September 15, 1997, the Company had assets totaling $25,100 and $2,674
in liabilities. Since the Company's inception, it has received a total of
$30,000 in cash paid as consideration for the issuance of shares of Common
Stock.
The Company has no potential capital resources.
Item 3. Description of Property.
The Company maintains its executive offices at business offices located at
4155 East Jewell Avenue, Suite #909, Denver, Colorado 80222, leased by an entity
affiliated with the Company. Its telephone number is (303) 691-6163. The Company
has agreed, commencing August 1, 1997, to pay a minimum of $100 per month in
rent on a month-to-month basis for this office-sharing arrangement; which
arrangement is expected to be adequate to meet the Company's foreseeable future
needs. The Company owns no real or personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of September 25,
1997, regarding the ownership of the Company's Common Stock by each shareholder
known by the Company to be the beneficial owner of more than five percent of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Each of the shareholders has sole voting and investment
power with respect to the shares of Common Stock beneficially owned.
Shares
Name and Address of Beneficially Percent
Beneficial Owner Owned of Class
- ---------------- --------- --------
Gary G. Clark* 706,000 4.67%
1530 South Eudora
Denver, Colorado 80222
David R. Reitsema* 706,000 4.67%
4155 East Jewell Avenue, #909
Denver, Colorado 80222
All Executive Officers and Directors 1,412,000 9.34%
as a Group (two persons)
- -------------------
*Executive officer and member of the Board of Directors of the Company.
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
Set forth below are the names, ages and positions with the Company and
business experience of the executive officers and directors of the Company.
Name Age Position(s) with Company
- ---- --- ------------------------
Gary G. Clark* 56 President and Director
David R. Reitsema* 51 Secretary/Treasurer and Director
- ------------------
*The above-named persons may be deemed to be "promoters" and "parents" of
the Company, as those terms are defined under the Rules and Regulations
promulgated under the Securities Act of 1933, as amended.
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Directors. It is anticipated that Messrs.
Clark and Reitsema will devote such time and effort as may be necessary to
participate in the day-to-day management of the affairs of the Company.
Family Relationships
No family relationship exists between the executive officers and directors
of the Company.
Business Experience
Gary G. Clark has served as a director of the Company since November 29,
1994; as the Company's Secretary/Treasurer from November 29, 1994, through
August 21, 1996; and as the President of the Company since August 21, 1996. Mr.
Clark has been a mortgage loan officer and mortgage broker since 1991 and, in
addition thereto, his prior business experience has included management in
retail and wholesale sales, real estate sales, personnel training, customer
service, inventory control and investment opportunities. He served as a director
of Attache Holdings, Ltd., and Enfield Trading Corporation, two publicly-held
corporations then having offices in Denver, Colorado, from April to July 1996.
Mr. Clark also served as a director of Gulf & Orient Steamship Company, a public
company formerly based in Denver, Colorado, from May 10, 1996, to June 27, 1996.
He was employed by Hilliscot Group, Inc., Denver, Colorado, as a mortgage banker
from November 1992 through November 1994. Mr. Clark was employed as the Sales
Manager for InterLink Communications of Colorado from 1990 to September 1993.
From 1977 to 1982, he was employed in the position of Regional Sales Manager in
the Rocky Mountain region for Westinghouse Corporation. Mr. Clark served as the
President and General Manager for Bragdon Appliance Company, a Denver,
Colorado-based retailer, from 1967 to 1977. He received a B.A. degree in
business administration from the University of Colorado in 1964 and performed
advanced studies at Notre Dame University from 1974 to 1977, Westinghouse
Learning Foundation in 1976 and Jones Real Estate College in 1985.
David R. Reitsema was the founder of the Company; served as a director
of the Company from its inception on September 26, 1994 through August 21, 1996,
when he resigned to pursue other business opportunities; and has served as a
Company director since July 25, 1997. Additionally, he served as the Acting
Secretary/Treasurer of the Company from September 28, 1994, through November 29,
1994, and as the Company's President from November 29, 1994, through August 21,
1996. Since July 25, 1997, Mr. Reitsema has served as the Secretary/Treasurer of
the Company. Mr. Reitsema has served as the President and a director of EDR
Financial, Inc., Denver, Colorado, a closely-held investment banking firm
co-founded and co-owned by him, since May 1994. He has served, since September
1995, as the President of Corporate International, Ltd., Denver, Colorado, a
5
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<TABLE>
<CAPTION>
closely-held corporation which he co-owns that is engaged primarily in business
consulting with firms involved in international transactions. From 1992 to 1994,
Mr. Reitsema owned and operated Silverthorne Funding Corporation, a mortgage
brokerage firm located in Denver, Colorado. He is an attorney who has been
licensed to practice in the State of Colorado since 1973. Mr. Reitsema received
a B.S. degree in 1968 from Calvin College, Grand Rapids, Michigan, and a J.D.
degree from the University of Denver College of Law in 1973.
Item 6. Executive Compensation.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Securities
and Annual Restricted Under- All Other
Principal Compen- Stock lying LTIP Compen-
Position Year Salary($) Bonus($) sation($) Award(s)($) SAR's(#) Payouts($) sation($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary G.
Clark 1995 - - $ 17,352 - - - -
President 1996 - - $ 4,314 - - - -
David R.
Reitsema
Secretary/ 1995 - - $ 10,446 - - - -
Treasurer 1996 - - $ 1,750 - - - -
Proposed Remuneration
- ---------------------
Commencing September 1, 1997, executive officers of the Company receive a
monthly salary in the amount of $250 plus commissions. Traditionally, mortgage
loan officers receive a portion of the gross commissions which are generated by
each respective loan officer. Since the President and Secretary/Treasurer of the
Company are the Company's only loan officers, each individual will receive 50%
of the gross commissions realized by the Company on loans attributable to the
other individual's lending activities.
Item 7. Certain Relationships and Related Transactions.
The Company maintains its executive offices at business offices leased by
an affiliated entity located at 4155 East Jewell Avenue, Suite #909, Denver,
Colorado 80222. The Company has agreed to pay, commencing August 1, 1997, a
minimum of $100 per month in rent on a month-to-month basis for this
office-sharing arrangement. The Company believes that the terms of this
arrangement are more favorable than those which could have been obtained from an
unaffiliated third party for comparable arrangements in the Denver, Colorado,
suburban area.
6
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</TABLE>
Item 8. Description of Securities.
Description of Capital Stock
- ----------------------------
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, no par value per share, and 5,000,000 shares of preferred stock,
no par value per share (hereinafter referred to as the "Preferred Stock").
Description of Common Stock
- ---------------------------
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and nonassessable shares. Cumulative voting in the election of
directors is not permitted; which means that the holders of a majority of the
issued and outstanding shares of Common Stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any, to be distributed to holders of the Preferred Stock. All shares of the
Company's Common Stock issued and outstanding are fully-paid and nonassessable.
Dividend Policy. Holders of shares of Common Stock are entitled to share
pro rata in dividends and distributions with respect to the Common Stock when,
as and if declared by the Board of Directors out of funds legally available
therefor, after requirements with respect to preferential dividends on, and
other matters relating to, the Preferred Stock, if any, have been met. The
Company has not paid any dividends on its Common Stock and intends to retain
earnings, if any, to finance the development and expansion of its business.
Future dividend policy is subject to the discretion of the Board of Directors
and will depend upon a number of factors, including future earnings, capital
requirements and the financial condition of the Company.
Transfer Agent and Registrar. The Transfer Agent and Registrar for the
Company's Common Stock is Corporate Stock Transfer, Inc., 370 Seventeenth
Street, Suite #2350, Denver, Colorado 80202.
Description of Preferred Stock
- ------------------------------
Shares of Preferred Stock may be issued from time to time in one or more
series as may be determined by the Board of Directors. The voting powers and
preferences, the relative rights of each such series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have preemptive
rights. The Company has no shares of Preferred Stock outstanding, and the Board
of Directors has no plan to issue any shares of Preferred Stock for the
foreseeable future unless the issuance thereof shall be in the best interests of
the Company.
7
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PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters.
(a) Market Information.
There has been no established public trading market for the Common Stock
since the Company's inception on September 28, 1994.
(b) Holders.
As of September 25, 1997, the Company had thirty-one shareholders of record
of its 15,112,000 issued and outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 2. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 3. Changes in and Disagreements with Accountants.
There has been no change in the Company's independent accountant, Kish,
Leake & Associates, P.C., 7901 East Belleview Avenue, Suite #220, Englewood,
Colorado 80111, during the Company's two most recent fiscal years ended December
31, 1995 and 1996, the interim period ended September 15, 1997, and the period
from September 15, 1997, through the date hereof.
Item 4. Recent Sales of Unregistered Securities.
The Company, in March 1996, issued and sold an aggregate of 412,000 shares
of Common Stock, at the rate of $.01 per share, to a Company shareholder in
satisfaction of the Company's indebtedness in the amount of $4,120 to said
shareholder for previous cash advances to the Company. The Company claimed the
exemptions from registration in connection with the transaction provided under
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and Section
11-51-308(1)(p) of the Colorado Securities Act, as amended (the "Colorado Act").
The Company relied upon the fact that the issuance of the shares in satisfaction
of the indebtedness did not constitute a public offering, to make the exemptions
available.
In August 1997, the Company issued and sold a total of 13,700,000 shares of
Common Stock to thirty-one residents of the State of Colorado in consideration
for the sum of $27,400 in cash ($.002 per share). In connection with the sales,
the Company relied upon the exemptions from registration provided under Section
4(2) of the Act and Section 11-51 308(1)(p) of the Colorado Act. The Company
relied upon the fact that the sales of the shares of Common Stock by the Company
did not constitute a public offering, to make the exemptions available.
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During the period from August 1 through September 10, 1997, the Company
issued and sold an aggregate of 26 units, each unit consisting of 50,000 shares
of Common Stock (an aggregate of 1,300,000 shares), to Colorado residents and
non-resident foreign nationals for cash consideration totaling $2,600 ($100 per
unit or $.002 per share). No underwriter was employed in connection with the
offering and sale of the shares. The Company claimed the exemptions from
registration in connection with the offering provided under Section 3(b) of the
Act and Rule 504 of Regulation D promulgated thereunder and Section
11-51-308(1)(p) of the Colorado Act. The facts relied upon by the Company to
make the exemptions available include the following: (i) the aggregate offering
price for the offering of the shares of Common Stock did not exceed $1,000,000,
less the aggregate offering price for all securities sold within the twelve
months before the start of and during the offering of the shares in reliance on
any exemption under Section 3(b) of, or in violation of Section 5(a) of, the
Act; (ii) the required number of manually executed originals and true copies of
Form D, accompanied, in connection with the Colorado notification of exemption,
with the appropriate exemption fee, were duly and timely filed with the U.S.
Securities and Exchange Commission and the Colorado Division of Securities;
(iii) no general soliciation or advertising was conducted by the Company in
connection with the offering of any of the shares; and (iv) the fact that the
Company has not been since its inception (a) subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; (b) an "investment company" within the meaning of the Investment
Company Act of 1940, as amended; or (c) a development stage company that either
has no specific business plan or purpose or has indicated that its business plan
is to engage in a merger or acquisition with an unidentified company or
companies, or other entity or person.
Item 5. Indemnification of Directors and Officers.
Article XIII of the Company's Articles of Incorporation contains provisions
providing for the indemnification of directors and officers of the Company as
follows:
The Board of Directors of the Corporation shall have the power to:
A. Indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation), by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Corporation and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe his conduct was unlawful. 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 did not act in good faith and in a manner which he reasonably believed to
be in the best interests of the Corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe the action was unlawful.
B. Indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of the Corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
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suit if he acted in good faith and in a manner he reasonably believed to be in
the best interests of the Corporation; but no indemnification shall be made in
respect of any claim, issue or matter as to which such person has been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought determines upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnification for such expenses which such court
deems proper.
C. Indemnify a Director, officer, employee or agent of the Corporation to
the extent that such person has been successful on the merits in defense of any
action, suit or proceeding referred to in Subparagraph A or B of this Article or
in defense of any claim, issue, or matter therein, against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
therewith.
D. Authorize indemnification under Subparagraph A or B of this Article
(unless ordered by a court) in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Subparagraph A or B. Such determination shall be made by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or, if such a quorum is not
obtainable or even if obtainable a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or by the shareholders.
E. Authorize payment of expenses (including attorney's fees) incurred in
defending a civil or criminal action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding as authorized in Subparagraph D
of this Article upon receipt of an undertaking by or on behalf of the Director,
officer, employee or agent to repay such amount unless it is ultimately
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article.
F. Purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or who is or was serving
at the request of the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the provision
of this Article.
The indemnification provided by this Article shall not be deemed exclusive
of any other rights to which those seeking indemnified may be entitled under
these Articles of Incorporation, and the Bylaws, agreement, vote of the
shareholders or disinterested directors or otherwise, and any procedure provided
for by any of the foregoing, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a Director, officer, employee or agent and
shall inure to the benefit of heirs, executors and administrators of such a
person.
The Company has no agreements with any of its directors or executive
officers providing for indemnification of any such persons with respect to
liability arising out of their capacity or status as officers and directors.
At present, there is no pending litigation or proceeding involving a
director or executive officer of the Company as to which indemnification is
being sought.
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PART F/S
The Financial Statements of Applied Capital Funding, Inc., required by
Regulation S-X commence on page F-1 hereof in response to Part F/S of this
Registration Statement on Form 10-SB and are incorporated herein by this
reference.
PART III
Item 1. Index to Exhibits.
Item
Number Description
- ------ -----------------------------------------------------------------
2.1* Articles of Incorporation of Applied Capital Funding, Inc.,
filed September 26, 1997.
2.2* Bylaws of Applied Capital Funding, Inc.
- ------------------
*Filed herewith.
Item 2. Description of Exhibits.
The documents required to be filed as Exhibit Number 2 in Part III of Form
1-A filed as part of this Registration Statement on Form 10-SB are listed in
Item 1 of this Part III above. No documents are required to be filed as Exhibit
Numbers 3, 5, 6 or 7 in Part III of Form 1-A, and the reference to such Exhibit
Numbers is therefore omitted. No additional exhibits are filed hereto.
11
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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.
APPLIED CAPITAL FUNDING, INC.
(Registrant)
Date: September 26, 1997 By: /s/ Gary G. Clark
------------------------------------------
Gary G. Clark, President
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APPLIED CAPITAL FUNDING, INC.
FINANCIAL STATEMENTS
with
Independent Auditors' Report
For the Years Ended December 31, 1996 and 1995
and the Unaudited Interim Period Ended September 15, 1997
<PAGE>
APPLIED CAPITAL FUNDING, INC.
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1
Financial Statements
Balance Sheet 2
Statement of Operations 3
Statement of Cash Flows 4
Statement of Shareholder's Equity 5
Notes to the Financial Statements 6-8
<PAGE>
Independent Auditor's Report
We have audited the accompanying balance sheet of Applied Capital Funding, Inc.,
at December 31, 1996, and the related statement of operations, shareholders'
equity, and cash flows for the year ended December 31, 1996 and 1995. 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 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 Applied Capital funding, Inc.
at December 31, 1996 and the results of its operations and its cash flows for
the years ended December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 4 to the financial
statements, the Company has a lack of sufficient working capital to operate as
of December 31, 1996. This raises substantial doubt about its ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note 4. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
July 28, 1997
-1-
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Applied Capital Funding, Inc.
Balance Sheet
- --------------------------------------------------------------------------------
Unaudited Audited
September December
NOTES 15, 1997 31, 1996
----- -------- --------
ASSETS
Current Assets - Cash $24,172 $ 9
Long-Term Assets - Deferred Tax Asset 1 928 900
------- -------
TOTAL ASSETS $25,100 $ 909
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts Payable $ 2,500 $ 0
Other Accrued Expenses 174 269
------- -------
TOTAL LIABILITIES 2,674 269
------- -------
SHAREHOLDERS' EQUITY 1,2,6
Preferred Stock, No Par Value,
Non Voting, Authorized 5,000,000 shares;
Issued And Outstanding -0- Shares 0 0
Common Stock, No Par Value
Authorized 50,000,000 shares; Issued And
Outstanding At September 15, 1997 (Unaudited)
15,112,000 Shares At December 31, 1996
1.412,000 Shares 26,120 4,220
Retained (Deficit) (3,694) (3,580)
------- -------
TOTAL SHAREHOLDERS' EQUITY 22,426 640
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $25,100 $ 909
======= =======
The Accompanying Notes Are An Integral Part Of These Financial Statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
Applied Capital Funding, Inc.
Statement Of Operations
- -----------------------------------------------------------------------------------
Unaudited
9 1/2 Months
Ended Year Ended Year Ended
September December December
Notes 15, 1997 31, 1996 31, 1995
----- -------- -------- --------
Income:
<S> <C> <C> <C>
Loan Fees $ 425 $ 23,363 $ 60,424
Other Revenue 0 8,675 0
------------ ------------ -------------
Total Revenue 425 32,038 60,424
------------ ------------ -------------
Operating Expenses:
Advertising 0 2,767 6,451
Appraisals, Credit Reports & Closing 56 4,603 14,728
Bank Charges 64 94 123
Contract Labor 0 0 2,803
Office 239 1,505 3,363
Rent 0 0 1,395
Salaries 0 19,473 27,819
Telephone 208 103 5
Taxes - Payroll 0 2,287 3,149
Travel 0 25 2,113
Total Expenses 567 30,857 61,949
------------ ------------ -------------
Net Income (Loss) Before Taxes (142) 1,181 (1,525)
Income Tax (Benefit) Expense (28) 192 (268)
------------ ------------ -------------
Net Income (Loss) (114) 989 (1,257)
Net (Loss) Per Common Share 1 ($ 0.00) $ 0.00 ($ 0.00)
============ ============ =============
Common Shares Outstanding 2 15,112,000 1,412,000 1,000,000
============ ============ =============
</TABLE>
The Accompanying Notes Are An Integral Part Of These Financial Statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
Applied Capital Funding, Inc.
Statement Of Cash Flow
- --------------------------------------------------------------------------------
Unaudited
9 1/2 Months
Ended Year Ended Year Ended
September December December
Notes 15, 1997 31, 1996 31, 1995
----- -------- -------- --------
<S> <C> <C> <C>
Net Profit (Loss) ($ 114) $ 989 ($ 1,257)
-------- --------- --------
Plus Items Not Affecting Cash Flow: 0 0 0
(Increase) Decrease In Deferred Tax a (28) 192 (268)
Increase (Decrease) In Accounts Payab 2,500 (1,712) 1,712
Increase (Decrease) In Accrued Expens (95) 88 181
-------- --------- --------
Net Cash Flows From Operations 2,263 (443) 368
-------- --------- --------
Cash Flows From Investing Activities:
0 0 0
Net Cash Flows From Investing: 0 0 0
Cash Flows From Financing Activities:
Common Stock Issued For Cash 27,400 0 0
Deferred Offering Costs (5,500) 0 0
Net Cash Flows From Financing: 21,900 0 0
-------- --------- --------
Net Increase (Decrease) In Cash 24,163 (443) 368
Cash At Beginning Of Period 9 452 84
-------- --------- --------
Cash At End Of Period $ 24,172 $ 9 $ 452
======== ========= ========
Summary Of Non-Cash Investing And Financing
Activities:
Common Stock Issued For Money Advanced $ 0 $ 412,000 $ 0
======== ========= ========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
-4-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Applied Capital Funding, Inc.
Statement Of Shareholders' Equity
- ----------------------------------------------------------------------------------------------------------------
Number Of Number Of Retained
Shares Shares Preferred Common Earnings
NOTES Preferred Common Stock Stock (Deficit) Total
----- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance At December 31, 1994 2,6 0 1,000,000 $0 $100 ($3,312) ($3,212)
Net (Loss) (1,257) (1,257)
---------- ---------- ---------- ---------- ---------- ----------
Balance At December 31, 1995 0 1,000,000 0 100 (4,569) (4,469)
----------
March, 1996 issued
412,000 Shares Of No Par Value
Common Stock For Advances
Previously Made By Shareholder 0 412,000 0 4,120 4,120
Net Profit 989 989
---------- ---------- ---------- ---------- ---------- ----------
Balance At December 31, 1996 0 1,412,000 0 4,220 (3,580) 640
August 1997 Issued 13,700,000
Shares Of No Par Value Common
Stock For Cash At $.002 Per Share 13,700,000 27,400 27,400
Deferred Offering Costs (5,500) (5,500)
Unaudited Net (Loss) (114) (114)
---------- ---------- ---------- ---------- ---------- ----------
Unaudited Balance At September 15, 19 0 15,112,000 $0 $26,120 ($3,694) $22,426
========== ========== ========== ========== ========== ==========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
-5-
</TABLE>
<PAGE>
Applied Capital Funding, Inc.
Notes To The Financial Statements
At December 31, 1996 and 1995
- -----------------------------
Note 1 - Organization and Summary of Significant Accounting Policies
- --------------------------------------------------------------------
Organization:
- -------------
On September 26, 1994, Applied Capital Funding, Inc. ("the Company") was
incorporated under the laws of Colorado, to engage in the business of
originating residential mortgage loans. The Company may also engage in any
business which is permitted by the Colorado Business Corporation Act, as
designated by the board of directors of the Company.
Statement of Cash Flows:
For purposes of the statement of cash flows, the Company considers demand
deposits and highly liquid-debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Cash paid for interest and taxes in the period ended December 31, 1996 and 1995
was $-0-.
Net (Loss) Per Common Share:
The net income (loss) per common share is computed by dividing the net income
(loss) for the period by the weighted average number of shares outstanding at
December 31, 1996 and 1995.
Use Of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Capital Stock
- ----------------------
Common Stock:
The Company initially authorized 50,000,000 shares of no par value common stock
and issued 1,000,000. In March 1996, a shareholder that had previously advanced
the Company money chose to issue an additional 412,000 shares in exchange for
the $4,120 that was owed.
-6-
<PAGE>
Applied Capital Funding, Inc.
Notes To The Financial Statements
At December 31, 1996 and 1995
- -----------------------------
Note 2 - Capital Stock (Continued)
- ----------------------------------
Preferred Stock
The Company initially authorized 5,000,000 shares of no par value, non-voting
preferred stock. No stock has been issued.
The Company has declared no dividends through December 31, 1996.
Note 3 - Income Taxes
- ---------------------
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset federal income taxes.
The Company has a net operating loss carryforward for tax purposes of $ $4,196
at December 31, 1996. These carryforwards, which management expects to be fully
utilized, will expire in 2010.
The components of the deferred income tax asset arising under FASB Statement No.
109 and recognized in the accompanying balance sheet are as follows:
Deferred Tax Asset $900
Valuation Allowance -0-
----
$900
====
The types of temporary differences between the tax basis of assets and their
financial reporting amounts that give rise to a significant portion of the
deferred tax asset are as follows:
Temporary Differences Tax Effect
--------------------- ----------
Accrued Expenses $ 306 $ 61
Net operating loss carryforward 4,196 839
------ ----
$4,502 $900
====== ====
-7-
<PAGE>
Applied Capital Funding, Inc.
Notes To The Financial Statements
At December 31, 1996 and 1995
- -----------------------------
Note 4 - Related Party Events
- -----------------------------
The Company presently maintains its principal offices at an address provided by
a related party. The office is located at 4155 E Jewell Ave - Suite 909, Denver,
Colorado 80222. Commencing August 1, 1997 the Company will pay a minimum of $100
per month in rent on a month to month basis.
Note 5 - Basis Of Presentation
- ------------------------------
In the course of its activities, the Company has sustained continuing losses and
expects such losses to continue in the foreseeable future. The Company plans to
continue financing its operations with stock sales and in the longer term,
revenues from its operations. The Company's ability to continue as a going
concern is dependent upon the successful completion of its offering of common
stock, additional financing and, ultimately, upon achieving profitable
operations.
Note 6 - Subsequent Events
- --------------------------
The Company offered for sale up to 250 units (the "Units") at $100.00 per Unit,
or $.002 per share, based on a best efforts basis to Colorado residents and
non-United States citizens only. Each Unit is comprised of 50,000 shares of no
par value common stock. The minimum purchase is 1 Unit for a total offering of
12,500,000 shares of no par value common stock or $25,000. The shares of common
stock contained in the Units are to be issued pursuant to an exemption from
registration under Section 3(b) and Regulation D, Rule 504, of the Securities
Act of 1933, as amended, and to an exemption to registration provided by Section
11-51-308(l)(p) of the Colorado Securities Act.
In August the Company sold 13,700,000 shares of its stock for $27,400 in cash.
The Company incurred deferred offering expenses of $5,500 comprised of legal and
accounting fees. These expenses are deducted from the proceeds. If the offering
was unsuccessful then these expenses would have been deducted.
The Company may file a registration statement at the completion of the offering,
to become a reporting company under the Securities and Exchange Act of 1934.
Note 7 - Unaudited Interim Financial Information
- ------------------------------------------------
The information furnished herein was taken from the books and records of the
Company without audit. The Company believes, however, that it has made all
adjustments necessary to reflect properly the results of operations for the
interim period ended September 15, 1997. The adjustments consist only of normal
reoccurring accruals. The results of operations for the interim period ended
September 15, 1997 are not necessarily indicative of the results to be expected
for the fiscal year ended December 31, 1997.
-8-
ARTICLES OF INCORPORATION
OF
APPLIED CAPITAL FUNDING, INC.
KNOW ALL MEN BY THESE PRESENTS that the undersigned Incorporator being a
natural person of the age of eighteen years of age or older and desiring to form
a body corporate under the laws of the State of Colorado does hereby sign,
verify and deliver in duplicate to the Secretary of State of the State of
Colorado these Articles of Incorporation:
ARTICLE I
Name
----
The name of the Corporation is APPLIED CAPITAL FUNDING, INC.
ARTICLE II
Period of Duration
------------------
This Corporation shall exist in perpetuity, from and after the date of
filing these Articles of Incorporation with the Secretary of State of Colorado
unless and until dissolved according to the laws of the State of Colorado.
ARTICLE III
Purposes
--------
Section 1. Specific Purposes
-----------------
A. To engage in the business of originating residential mortgage loans.
B. To engage in the business of commercial and wholesale lending on
commercial and residential properties, including development of raw land.
Section 2. General Purposes
----------------
A. To own, operate and maintain such real or personal property as may be
necessary to conduct such business and to do all of the things in connection
with the real or personal property which might be done by an individual.
B. To hire and employ agents and employees, and to enter into agreements of
employment and collective bargaining agreements for the purpose of advancement
and performance of the purposes of this Corporation.
C. To carry on any other business, whether or not related to the foregoing,
including the transaction of all lawful business for which corporations may be
organized pursuant to the Colorado Corporation Code, to have and exercise all
powers, privileges and immunities now or hereafter conferred upon or permitted
to corporations by the laws of the State of Colorado, and to do any and all
things herein set forth to the same extent as natural persons could do insofar
as permitted by the laws of the State of Colorado.
<PAGE>
D. To do those things which are authorized and permitted by the Colorado
Corporations Code.
E. To do all things authorized by law or incidental thereto.
ARTICLE IV
Powers
------
The powers of the Corporation shall be those powers granted by Article Two
of the Colorado Corporation Code under which this Corporation is formed. In
addition, the Corporation shall have the following specific powers:
Section 1. Officers. The Corporation shall have the power to elect or
appoint officers and agents of the Corporation and to fix their compensation.
Section 2. Capacity. The Corporation shall have the power to act as an
agent for any individual, association, partnership, corporation or other legal
entity, and to act as general partner for any limited partnership.
Section 3. Acquisitions. The Corporation shall have the power to receive,
acquire, hold, exercise rights arising out of the ownership or possession
thereof, sell, or otherwise dispose of, shares or other interests in, or
obligations of, individuals, associations, partnerships, corporations or
governments.
Section 4. Earned Surplus. The Corporation shall have the power to receive,
acquire, hold, pledge, transfer, or otherwise dispose of shares of the
Corporation, but such shares may only be purchased, directly or indirectly, out
of earned surplus.
Section 5. Gifts. The Corporation shall have the power to make gifts or
contributions for the public welfare or for charitable, scientific or
educational purposes
2
<PAGE>
ARTICLE V
Capital Structure
-----------------
Section 1. Authorized Capital. The aggregate number of shares and the
amount of the total authorized capital of said Corporation shall consist of
50,000,000 shares of common stock, no par value per share, and 5,000,000 shares
of non-voting preferred stock, no par value per share.
Section 2. Share Status. All common shares will be equal to each other, and
when issued, shall be fully paid and nonassessable, and the private property of
shareholders shall not be liable for corporate debts. Preferred shares shall
have such preferences as the Directors may assign to them prior to issuance.
Each holder of a common share of record shall have one vote for each share of
stock outstanding in his name on the books of the Corporation and shall be
entitled to vote said stock.
Section 3. Consideration for Shares. The common stock of the Corporation
shall be issued for such consideration as shall be fixed from time to time by
the Board of Directors. In the absence of fraud, the judgment of the Directors
as to the value of any property or services received in full or partial payment
for shares shall be conclusive. When shares are issued upon payment of the
consideration fixed by the Board of Directors, such shares shall be taken to be
fully paid stock and shall be nonassessable.
Section 4. Pre-Emptive Rights. Except as may otherwise be provided by the
Board of Directors, holders of shares of stock of the Corporation shall have no
pre-emptive right to purchase, subscribe for or otherwise acquire shares of
stock of the Corporation, rights, warrants or options to purchase stocks or
securities of any kind convertible into stock of the Corporation.
Section 5. Dividends. Dividends in cash, property or shares of the
Corporation may be paid, as and when declared by the Board of Directors, out
of funds of the Corporation to the extent and in the manner permitted by law.
Section 6. Distribution in Liquidation. Upon any liquidation, dissolution
or winding up of the Corporation, and after paying or adequately providing for
the payment of all its obligations, the remainder of the assets of the
Corporation shall be distributed, either in cash or in kind, pro rata to the
holders of the common stock, subject to preferences, if any, granted to holders
of the preferred shares. The Board of Directors may, from time to time,
distribute to the shareholders in partial liquidation from stated capital of the
Corporation, in cash or property, without the vote of the shareholders, in the
manner permitted and upon compliance with limitations imposed by law.
3
<PAGE>
ARTICLE VI
Voting by Shareholders
----------------------
Section 1. Voting Rights; Cumulative Voting. Each outstanding share of
common stock is entitled to one vote and each fractional share of common stock
is entitled to a corresponding fractional vote on each matter submitted to a
vote of shareholders. Cumulative voting shall not be allowed in the election of
Directors of the Corporation and every shareholder entitled to vote at such
election shall have the right to vote the number of shares owned by him for as
many persons as there are Directors to be elected, and for whose election he has
a right to vote. Preferred shares have no voting rights unless granted by
amendment to these Articles of Incorporation.
Section 2. Majority Vote. When, with respect to any action to be taken by
the Shareholders of the Corporation, the Colorado Corporation Code requires the
vote or concurrence of the holders of two-thirds of the outstanding shares
entitled to vote thereon, or of any class or series, any and every such action
shall be taken, notwithstanding such requirements of the Colorado Corporation
Code, by the vote or concurrence of the holders of a majority of the outstanding
shares entitled to vote thereon, or of any class or series.
ARTICLE VII
Registered and Principal Office and Registered Agent
----------------------------------------------------
The registered and principal office of the Corporation is located at 3079
S. Quince Way, Denver, CO 80231, and the name of the registered agent of the
Corporation at such address is David R. Reitsema.
ARTICLE VIII
Incorporator
------------
The name and address of the Incorporator is David R. Reitsema, 3079 S.
Quince Way, Denver, CO 80231.
ARTICLE IX
Board of Directors
------------------
Section 1. The corporate powers shall be exercised by a majority of the
Board of Directors. The number of individuals to serve on the Board of Directors
shall be set forth in the Bylaws of the Corporation; provided, however, that the
initial Board of Directors shall consist of one person below-named to manage the
affairs of the Corporation until such time as he resigns or his successor is
elected by a majority vote of the Shareholders:
Name of Director Address
---------------- -------
David R. Reitsema 3079 S. Quince Way
Denver, CO 80231
4
<PAGE>
Section 2. If in the interval between the annual meetings of shareholders
of the Corporation, the Board of Directors of the Corporation deems it desirable
that the number of Directors be increased, additional Directors may be elected
by a unanimous vote of the Board of Directors of the Corporation then in office,
or as otherwise set forth in the Bylaws of the Corporation.
Section 3. The number of Directors comprising the whole Board of Directors
may be increased or decreased from time to time within such foregoing limit as
set forth in the Bylaws of the Corporation.
ARTICLE X
Powers of the Board of Directors
--------------------------------
In furtherance and not in limitation of the powers conferred by the State
of Colorado, the Board of Directors is expressly authorized and empowered:
Section 1. Bylaws. To make, alter, amend and repeal the Bylaws, subject to
the power of the shareholders to alter or repeal the Bylaws made by the Board of
Directors.
Section 2. Books and Records. Subject to the applicable provisions of the
Bylaws then in effect, to determine, from time to time, whether and to what
extent, and at what times and places, and under what conditions and regulations,
the accounts and books of the Corporation or any of them, shall be open to
shareholder inspection. No shareholder shall have any right to inspect any of
the accounts, books, or documents of the Corporation, except as permitted by
law, unless and until authorized to do so by resolution of the Board of
Directors or of the shareholders of the Corporation.
Section 3. Power to Borrow. To authorize and issue, without shareholder
consent, obligations of the Corporation, secured and unsecured, under such terms
and conditions as the Board, in its sole discretion, may determine, and to
pledge, or mortgage, as security therefor, any real or personal property of the
Corporation, including after-acquired property.
Section 4. Dividends. To determine whether any and, if so, what part, of
the earned surplus of the Corporation shall be paid in dividends to the
shareholders, and to direct and determine other use and disposition of any such
earned surplus.
Section 5. Profits. To fix, from time to time, the amount of the profits of
the Corporation to be reserved as working capital or for any other lawful
purposes.
Section 6. Employees' Plans. From time to time to provide and carry out and
to recall, abolish, revise, amend, alter, or change a plan or plans for the
participation by all or any of the employees, including Directors and officers
of this Corporation or of any corporation in which or in the welfare of which
the Corporation has any interest, and those actively engaged in the conduct of
this Corporation's business, in the profits of this Corporation or of any branch
or division thereof, as a part of this Corporation's legitimate expenses, and
for the furnishing to such employees and persons, or any of them, at this
Corporation's expense, of medical services, insurance against accident,
sickness, or death, pensions during old age, disability, or unemployment,
education, housing, social services, recreation, or other similar aids for their
relief or general welfare, in such manner and upon such terms and conditions as
may be determined by the Board of Directors.
5
<PAGE>
Section 7. Warrants and Options. The Corporation, by resolution or
resolutions of its Board of Directors, shall have power to create and issue,
whether or not in connection with the issue and sale of any shares of any other
securities of the Corporation, warrants, rights, or options entitling the
holders thereof to purchase from the Corporation any shares of any class or
classes of any other securities of the Corporation, such warrants, rights or
options to be evidenced by or in such instrument or instruments as shall be
approved by the Board of Directors. The terms upon which, the time or times
(which may be limited or unlimited in duration), and the price or prices (not
less than the minimum amount prescribed by law, if any) at which any such
warrants, rights, or options may be issued and any such shares or other
securities may be purchased from the Corporation upon the exercise of such
warrant, right, or option shall be such as shall be fixed and stated in the
resolution or resolutions of the Board of Directors providing for the creation
and issue of such warrants, rights or options. The Board of Directors is hereby
authorized to create and issue any such warrants, rights or options from time to
time for such consideration, and to such persons, firms, or corporations, as the
Board of Directors may determine.
Section 8. Compensation. To provide for the reasonable compensation of its
own members, and to fix the terms and conditions upon which such compensation
will be paid.
Section 9. Not in Limitation. In addition to the powers and authority
hereinabove, or by statute expressly conferred upon it, the Board of Directors
may exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the laws
of the State of Colorado, of these Articles of Incorporation and of the Bylaws
of the Corporation.
ARTICLE XI
Right of Directors to Contract with Corporation
-----------------------------------------------
No contract or other transaction between this Corporation and one or more
of its Directors or any other corporation, firm, association, or entity in which
one or more of its Directors are directors or officers or are financially
interested shall be either void or voidable solely because of such relationship
or interest or solely because such directors are present at the meeting of the
Board of Directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction or solely because their votes are counted
for such purpose if:
6
<PAGE>
A. The fact of such relationship or interest is disclosed or known to the
Board of Directors or committee which authorizes, approves, or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes of consents of such interested Directors; or
B. The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or
C. The contract or transaction is fair and reasonable to the Corporation.
ARTICLE XII
Corporate Opportunity
---------------------
The officers, Directors and other members of management of this Corporation
shall be subject to the doctrine of "corporate opportunities" only insofar as it
applies to business opportunities in which this Corporation has expressed an
interest as determined from time to time by this Corporation's Board of
Directors as evidenced by resolutions appearing in the Corporation's minutes.
Once such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
Directors, and other members of management of this Corporation shall be
disclosed promptly to this Corporation and made available to it. The Board of
Directors may reject any business opportunity presented to it and thereafter any
officer, Director or other member of management may avail himself of such
opportunity. Until such time as this Corporation, through its Board of
Directors, has designated an area of interest, the officers, Directors and other
members of management of this Corporation shall be free to engage in such areas
of interest on their own and this doctrine shall not limit the right of any
officer, Director or other member of management of this Corporation to continue
a business existing prior to the time that such area of interest is designated
by the Corporation. This provision shall not be construed to release any
employee of this Corporation (other than an officer, Director or member of
management) from any duties which he may have to this Corporation.
ARTICLE XIII
Indemnification of Officers, Directors and Others
-------------------------------------------------
The Board of Directors of the Corporation shall have the power to:
A. Indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation), by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
7
<PAGE>
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Corporation and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe his conduct was unlawful. 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 did not act in good faith and in a manner which he reasonably believed to
be in the best interests of the Corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
B. Indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of the Corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
the best interests of the Corporation; but no indemnification shall be made in
respect of any claim, issue or matter as to which such person has been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought determines upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnification for such expenses which such court
deems proper.
C. Indemnify a Director, officer, employee or agent of the Corporation to
the extent that such person has been successful on the merits in defense of any
action, suit or proceeding referred to in Subparagraph A or B of this Article or
in defense of any claim, issue, or matter therein, against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
therewith.
D. Authorize indemnification under Subparagraph A or B of this Article
(unless ordered by a court) in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Subparagraph A or B. Such determination shall be made by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or, if such a quorum is not
obtainable or even if obtainable a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or by the shareholders.
E. Authorize payment of expenses (including attorney's fees) incurred in
defending a civil or criminal action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding as authorized in Subparagraph D
of this Article upon receipt of an undertaking by or on behalf of the Director,
8
<PAGE>
officer, employee or agent to repay such amount unless it is ultimately
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article.
F. Purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or who is or was serving
at the request of the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the provision
of this Article.
The indemnification provided by this Article shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under these
Articles of Incorporation, and the Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise, and any procedure provided for by any of
the foregoing, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of heirs, executors and administrators of such a person.
ARTICLE XIV
Right to Amend
--------------
The right is expressly reserved to amend, alter, change, or repeal any
provision or provisions contained in these Article of Incorporation or any
Article herein by a majority vote of the members of the Board of Directors, and
a majority vote of the shareholders of the Corporation.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 15th day
of September, 1994.
/s/ DAVID R. REITSEMA
- --------------------------------
David R. Reitsema, Incorporator
CONSENT OF AGENT
The undersigned hereby consents to be the Agent for Applied Capital
Funding, Inc., under the Section 105 of the Colorado Corporation Act, until such
time has he resigns such position.
/s/ DAVID R. REITSEMA
- --------------------------------
David R. Reitsema
3079 S. Quince Way, Denver, CO 80231
9
BYLAWS
OF
APPLIED CAPITAL FUNDING, INC.
ARTICLE I
Offices
-------
The principal office of the Corporation in Colorado shall initially be
located in Denver, Colorado. The Corporation may have such other offices, either
within or outside the State of 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
Corporation Act to be maintained in the State of 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 pursuant to notice
given by the Board of Directors for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Special Meetings.
----------------
Special meetings of the shareholders, for any purpose, unless otherwise
prescribed by statute, may be called by the President or by the Board of
Directors, and shall be called by the President at the request of the holders of
not less than ten (10%) percent of all the outstanding shares of the Corporation
entitled to vote at the meeting. Such request shall state the purposes of the
proposed meeting.
Section 3. Adjournment.
-----------
a. When the annual meeting is convened, or when any special meeting is
convened, the presiding officer may adjourn it for such period of time as may be
reasonably necessary to reconvene the meeting at another place and another time.
b. The presiding officer shall have the power to adjourn any meeting of the
shareholders for any proper purpose, including, but not limited to, lack of a
<PAGE>
quorum, to secure a more adequate meeting place, to elect officials to count and
tabulate votes, to review any shareholder proposals or to pass upon any
challenge which may properly come before the meeting.
c. When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If,
however, after the adjournment the Board fixes a new record date for the
adjourned meeting, a notice of the adjourned meeting shall be given in
compliance with Subsection (4)(a) of this Article II to each shareholder of
record on the new record date entitled to vote at such meeting.
Section 4. Notice of Meeting; Purpose of Meeting; Waiver
----------------------------------------------
a. Each shareholder of record entitled to vote at any meeting shall be
given in person, or by first class mail, postage prepaid, written notice of such
meeting which, in the case of a special meeting, shall set forth the purpose(s)
for which the meeting is called, not less than ten (10) or more then fifty (50)
days before the date of such meeting. If mailed, such notice is to be sent to
the shareholder's address as it appears on the stock transfer books of the
Corporation unless the shareholder shall have requested of the Secretary in
writing at least fifteen (15) days prior to the distribution of any required
notice that any notice intended for him to be sent to some other address, in
which case the notice may be sent to the address so designated. Notwithstanding
any such request by a shareholder, notice sent to a shareholder's address as it
appears on the stock transfer books of this Corporation as of the record date
shall be deemed properly given. Any notice of a meeting sent by the United
States mail shall be deemed delivered when deposited with proper postage thereon
with the United States Postal Service or in any mail receptacle under its
control.
b. A shareholder waives notice of any meeting by attendance, either in
person or by proxy, at such meeting or by waiving notice in writing either
before, during or after such meeting. Attendance at a meeting for the express
purpose of objecting that the meeting was not lawfully called or convened,
however, will not constitute a waiver of notice by a shareholder stating at the
beginning of the meeting, his objection that the meeting is not lawfully called
or convened.
c. Whenever the holders of at least eighty (80%) percent of the capital
stock of the Corporation having the right to vote shall be present at any annual
or special meeting of shareholders, however called or notified, and shall sign a
written consent thereto on the minutes of such meeting, the meeting shall be
valid for all purposes.
d. A Waiver of Notice signed by all shareholders entitled to vote at a
meeting of shareholders may also be used for any other proper purpose including,
but not limited to, designating any place within or without the State of
Colorado as the place for holding such a meeting.
e. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of shareholders need be specified in any written
Waiver of Notice.
2
<PAGE>
Section 5. Closing of Transfer Books; Record Date; Shareholders' List.
----------------------------------------------------------
a. In order to determine the holders of record of the capital stock of the
Corporation who are entitled to notice of meetings, to vote at a meeting or
adjournment thereof, or to receive payment of any dividend, or for any other
purpose, the Board of Directors may fix a date not more than fifty (50) days
prior to the date set for any of the above-mentioned activities for such
determination of shareholders.
b. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting.
c. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the date for such determination of shareholders, such
date in any case to be not more than fifty (50) days and, in case of a meeting
of shareholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
d. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice or to vote at a meeting
of shareholders, or to receive payment of a dividend, the date on which notice
of the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders.
e. When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date under this section for the adjourned meeting.
f. The officer or agent having charge of the stock transfer books of the
Corporation shall make, as of a date at least ten (10) days before each meeting
of shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, with the address of each shareholder and the
number and class and series, if any, of shares held by each shareholder. Such
list shall be kept on file at the registered office of the Corporation or at the
office of the transfer agent or registrar of the Corporation for a period of ten
(10) days prior to such meeting and shall be available for inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of any meeting of shareholders and
shall be subject to inspection by any shareholder at any time during the
meeting.
g. The original stock transfer books shall be prima facie evidence as to
the shareholders entitled to examine such list or stock transfer books or to
vote at any meeting of shareholders.
h. If the requirements of Subsection 5(f) of this Article II have not been
substantially complied with then, on the demand of any shareholder in person or
by proxy, the meeting shall be adjourned until such requirements are complied
with.
3
<PAGE>
i. If no demand pursuant to Section 5(h) is made, failure to comply with
the requirements of this Section shall not affect the validity of any action
taken at such meeting.
j. Subsection 5(g) of this Article II shall be operative only at such
time(s) as the Corporation shall have six (6) or more shareholders.
Section 6. Quorum.
------
a. At any meeting of the shareholders of the Corporation, the presence, in
person or by proxy, of shareholders owning a majority of the issued and
outstanding shares of the capital stock of the Corporation entitled to vote
thereat shall be necessary to constitute a quorum for the transaction of any
business. If a quorum is present the affirmative vote of a majority of the
shares represented at such meeting and entitled to vote on the subject matter
shall be the act of the shareholders. If there shall not be a quorum at any
meeting of the shareholders of the Corporation, then the holders of a majority
of the shares of the capital stock of the Corporation who shall be present at
such meeting, in person or by proxy, may adjourn such meeting from time to time
until holders of a majority of the shares of the capital stock shall attend. At
any such adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting as originally
scheduled.
b. The shareholders at a duly organized meeting having a quorum may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 7. Presiding Officer; Order of Business.
------------------------------------
a. Meetings of the shareholders shall be presided over by the Chairman of
the Board, or, if he is not present, by the President or, if he is not present,
by a Vice President or, if none of the Chairman of the Board, the President, or
a Vice President is present, the meeting shall be presided over by a Chairman to
be chosen by a plurality of the shareholders entitled to vote at the meeting who
are present, in person or by proxy. The presiding officer of any meeting of the
shareholders may delegate the duties and obligations of the presiding officer of
the meeting as he sees fit.
b. The Secretary of the Corporation, or, in his absence, an Assistant
Secretary shall act as Secretary of every meeting of shareholders, but if
neither the Secretary nor an Assistant Secretary is present, the presiding
officer of the meeting shall choose any person present to act as Secretary of
the meeting.
c. The order of business shall be as follows:
1. Call of meeting to order.
2. Proof of notice of meeting.
3. Reading of minutes of last previous shareholders meeting
or a Waiver thereof.
4. Reports of officers.
5. Reports of committees.
6. Election of directors.
7. Regular and miscellaneous business.
8. Special matters.
9. Adjournment.
4
<PAGE>
d. Notwithstanding the provisions of Article II, Section 7, Subsection c,
the order and topics of business to be transacted at any meeting shall be
determined by the presiding officer of the meeting in his sole discretion. In no
event shall any variation in the order of business or additions and deletions
from the order of business as specified in Article II, Section 7, Subsection c,
invalidate any actions properly taken at any meeting.
Section 8. Voting.
------
a. Unless otherwise provided for in the Certificate of Incorporation, each
shareholder shall be entitled, at each meeting and upon each proposal to be
voted upon, to one vote for each share of voting stock recorded in his name on
the books of the Corporation on the record date fixed as provided for in Article
II, Section 5.
b. The presiding officer at any meeting of the shareholders shall have the
power to determine the method and means of voting when any matter is to be voted
upon. The method and means of voting may include, but shall not be limited to,
vote by ballot, vote by hand or vote by voice. However, no method of voting may
be adopted which fails to take account of any shareholder's right to vote by
proxy as provided for in Section 10 of this Article II. In no event may any
method of voting be adopted which would prejudice the outcome of the vote.
Section 9. Action Without Meeting.
----------------------
a. Any action required to be taken at any annual or special meeting of
shareholders of the Corporation, or any action which may be taken at any annual
or special meeting of such shareholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. If any class of shares is
entitled to vote thereon as a class, such written consent shall be required of
the holders of a majority of the shares of each class of shares entitled to vote
thereon.
b. Within ten (10) days after obtaining such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action be a merger, consolidation or sale or
exchange of assets for which dissenters' rights are provided under the Colorado
Corporation Code, the notice shall contain a clear statement of the right of the
shareholders dissenting therefrom to be paid the fair value of their shares upon
compliance with further provisions of the Colorado Corporation Code regarding
the rights of dissenting shareholders.
5
<PAGE>
c. In the event that the action to which the shareholders' consent is such
as would have required the filing of a certificate under the Colorado
Corporation Code if such action had been voted on by shareholders at a meeting
thereof, the certificate filed under such other section shall state that written
consent has been given in accordance with the provisions of this Article II,
Section 9.
Section 10. Proxies.
-------
a. Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting, or his duly authorized
attorney-in-fact may authorize another person or persons to act for him by
proxy.
b. Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven (11) months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided in
this Article II, Section 10.
c. The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of shareholders.
d. Except when other provisions shall have been made by written agreement
between the parties, the record holder of shares held as pledges or otherwise as
security or which belong to another, shall issue to the pledgor or to such owner
of such shares, upon demand therefor and payment of necessary expenses thereof,
a proxy to vote or take other action thereon.
e. A proxy which states that it is irrevocable is irrevocable when it is
held by any of the following or a nominee of any of the following: (i) a
pledgee; (ii) a person who has purchased or agreed to purchase the shares; (iii)
a creditor or creditors of the Corporation who extend or continue to extend
credit to the Corporation in consideration of the proxy, if the proxy states
that it was given in consideration of such extension or continuation of credit,
the amount thereof, and the name of the person extending or continuing credit;
(iv) a person who has contracted to perform services as an officer of the
Corporation, if a proxy is required by the contract of employment, if the proxy
states that it was given in consideration of such contract of employment and
states the name of the employee and the period of employment contracted for; and
(v) a person designated by or under an agreement as provided in Article XI
hereof.
f. Notwithstanding a provision in a proxy stating that it is irrevocable,
the proxy becomes revocable after the pledge is redeemed, or the debt of the
Corporation is paid, or the period of employment provided for in the contract of
employment has terminated, or the agreement under Article XII hereof, has
terminated and, in a case provided for in Subsection 10(e)(iii) or Subsection
10(e)(iv) of this Article II becomes irrevocable three years after the date of
the proxy or at the end of the period, if any, specified therein, whichever
period is less, unless the period of irrevocability is renewed from time to time
by the execution of a new irrevocable proxy as provided in this Article II,
Section 10. This Subsection 10(f) does not affect the duration of a proxy under
Subsection 10(b) of this Article II.
6
<PAGE>
g. A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability is noted
conspicuously on the face or back of the certificate representing such shares.
h. If a proxy for the same shares confers authority upon two (2) or more
persons and does not otherwise provide a majority of such persons present at the
meeting, or if only one is present, then that one may exercise all the powers
conferred by the proxy. If the proxy holders present at the meeting are equally
divided as to the right and manner of voting in any particular case, the voting
of such shares shall be prorated.
i. If a proxy expressly so provides, any proxy holder may appoint in
writing a substitute to act in his place.
Section 11. Voting of Shares by Shareholders.
--------------------------------
a. Shares standing in the name of another corporation, domestic or foreign,
may be voted by the officer, agent, or proxy designated by the Bylaws of the
corporate shareholder; or, in the absence of any applicable Bylaw, by such
person as the Board of Directors of the corporate shareholder may designate.
Proof of such designation may be made by presentation of a certified copy of the
Bylaws or other instrument of the corporate shareholder. In the absence of any
such designation, or in case of conflicting designation by the corporate
shareholder, the Chairman of the Board, President, any vice president, secretary
and treasurer of the corporate shareholder, in that order shall be presumed to
possess authority to vote such shares.
b. Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
c. Shares standing in the name of a receiver may be voted by such receiver.
Shares held by or under the control of a receiver but not standing in the name
of such receiver, may be voted by such receiver without the transfer thereof
into his name if authority to do so is contained in an appropriate order of the
court by which such receiver was appointed.
d. A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledge.
e. Shares of the capital stock of the Corporation belonging to the
Corporation or held by it in a fiduciary capacity shall not be voted, directly
or indirectly, at any meeting, and shall not be counted in determining the total
number of outstanding shares.
7
<PAGE>
ARTICLE III
Director
--------
Section 1. Board of Directors; Exercise of Corporate Powers.
------------------------------------------------
a. 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 the Board of Directors except as may be otherwise provided in the
Articles of Incorporation. If any such provision is made in the Articles of
Incorporation, the powers and duties conferred or imposed upon the Board of
Directors shall be exercised or performed to such extent and by such person or
persons as shall be provided in the Articles of Incorporation.
b. Directors need not be residents of the state of incorporation unless the
Articles of Incorporation so require.
c. The Board of Directors shall have authority to fix the compensation of
Directors unless otherwise provided in the Articles of Incorporation.
d. A Director shall perform his duties as a Director, including his duties
as a member of any committee of the Board upon which he may serve, in good
faith, in a manner he reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
e. In performing his duties, a Director shall be entitled to rely on
information, opinions, reports or statements, including financial data, in each
case prepared or presented by: (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) counsel, public accountants or other persons as
to matters which the Director reasonably believes to be within such persons'
professional or expert competence; or (iii) a committee of the Board upon which
he does not serve, duly designated in accordance with a provision of the
Articles of Incorporation or the Bylaws, as to matters within its designated
authority, which committee the Director reasonably believes to merit confidence.
f. A Director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described in Subsection 1(e) of this Article III to be unwarranted.
g. A person who performs his duties in compliance with this Article II,
Section 1 shall have no liability by reason of being or having been a Director
of the Corporation.
h. A Director of the Corporation who is present at a meeting of the Board
of Directors at which action on any corporate matter is taken unless he votes
against such action or abstains from voting in respect thereto because of an
asserted conflict of interest.
8
<PAGE>
Section 2. Number; Election; Classification of Directors; Vacancies.
--------------------------------------------------------
a. The Board of Directors of this Corporation shall consist of not less
than three (3) nor more than seven (7) members. The number of directors shall be
fixed by the initial Board of Directors. The number of directors constituting
the initial Board of Directors shall be fixed by the Articles of Incorporation.
The number of directors may be increased from time to time by the Board of
directors, but no decrease shall have the effect of shortening the term of any
incumbent director.
b. Each person named in the Articles of Incorporation as a member of the
initial Board of Directors, shall hold office until the first annual meeting of
shareholders, and until his successor shall have been elected and qualified or
until his earlier resignation, removal from office or death.
c. At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting, except in case of the classification of directors as
permitted by the Colorado Corporation Code. Each director shall hold office for
the term for which he is elected and until his successor shall have been elected
and qualified or until his earlier resignation, removal from office or death.
d. The shareholders, by amendment to these Bylaws, may provide that the
directors be divided into not more than four classes, as nearly equal in number
as possible, whose terms of office shall respectively expire at different times,
but no such term shall continue longer than four (4) years, and at least
one-fifth (l/5) in number of the directors shall be elected annually.
e. If directors are classified and the number of directors is thereafter
changed, any increase or decrease in directorships shall be so apportioned among
the classes as to make all classes as nearly equal in number as possible.
f. Any vacancy occurring in the Board of Directors including any vacancy
created by reason of an increase in the number of directors, may be filled by
the affirmative vote of a majority of the remaining directors though less than a
quorum of the Board of Directors. A director elected to fill a vacancy shall
hold office only until the next election of directors by the shareholders.
Section 3. Removal of Directors.
--------------------
a. At a meeting of shareholders called expressly for that purpose,
directors may be removed in the manner provided in this Article III, Section 3.
Any director or the entire Board of Directors may be removed, with or without
cause, by a vote of the holders of a majority of the shares then entitled to
vote at an election of directors.
b. If the Corporation has cumulative voting, if less than the entire Board
is to be removed, no one of the directors may be removed if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the entire Board of Directors, or, if there be classes of
directors, at an election of the class of directors of which he is a member.
9
<PAGE>
c. Whenever the holders of the shares of any class are entitled to elect
one or more directors by the provisions of the Articles of Incorporation, the
provisions of this Article III, or directors so elected) to the vote of the
holders of the outstanding shares of that class and not to the vote of the
outstanding shares as a whole.
Section 4. Director Quorum and Voting.
--------------------------
a. A majority of the number of directors fixed in the manner provided in
these Bylaws shall constitute a quorum for the transaction of business unless a
greater number if required elsewhere in these Bylaws.
b. A majority of the members of an Executive Committee or other committee
shall constitute a quorum for the transaction of business at any meeting of such
Executive Committee or other committee.
c. The act of the majority of the directors present at a Board meeting at
which a quorum is present shall be the act of the Board of Directors.
d. The act of a majority of the members of an Executive Committee present
at an Executive Committee meeting at which a quorum is present shall be the act
of the Executive Committee.
e. The act of a majority of the members of any other committee present at a
committee meeting at which a quorum is present shall be the act of the
committee.
Section 5. Director Conflicts of Interest.
------------------------------
a. No contract or other transaction between this Corporation and one or
more of its directors or any other Corporation, firm, association or entity in
which one or more of its directors are directors or officers or are financially
interested, shall be either void or voidable because of a relationship or
interest or because such director or directors are present at the meeting of the
Board of Directors or a committee thereof which authorizes, approves or ratifies
such contract or transaction or because his or their votes are counted for such
purpose, if:
(i) The fact of such relationship or interest is disclosed or known to
the Board of Directors or committee which authorizes, approves or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors; or
10
<PAGE>
(ii) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
(iii) The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized by the Board, a committee, or the
shareholders.
b. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
Section 6. Executive and Other Committees; Designation; Authority.
------------------------------------------------------
a. The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members an Executive Committee
and one or more other committees each of which, to the extent provided in such
resolution or in the Articles of Incorporation or these Bylaws, shall have and
may exercise all the authority of the Board of Directors, except that no such
committee shall have the authority to: (i) approve or recommend to shareholders
actions or proposals required by the Colorado Corporation Code to be approved by
shareholders; (ii) designate candidates for the office of director for purposes
of proxy solicitation or otherwise; (iii) fill vacancies on the Board of
Directors or any committee thereof; (iv) amend the Bylaws; (v) authorize or
formula or method specified by the Board of Directors; or (vi) authorize or
approve the issuance or sale of, or any contract to issue or sell, shares or
designate the terms of a series of class of shares, unless the Board of
Directors, having acted regarding general authorization for the issuance or sale
of shares, or any contract therefor, and, in the case of a series, the
designation thereof, has specified a general formula or method by resolution or
by adoption of a stock option or other plan, authorized a committee to fix the
terms upon which such shares may be issued or sold, including, without
limitation, the price, the rate or manner of payment of dividends, provisions
for redemption, sinking fund, conversion, and voting preferential rights, and
provisions for other features of a class of shares, or a series of class of
shares, with fulls power in such committee to adopt any final resolution setting
forth all the terms thereof and to authorize the statement of the terms of a
series for filing with the Secretary of State under the Colorado Corporation
Code.
b. The Board, by resolution adopted in accordance with Article III,
Subsection 6(a) may designate one or more directors as alternate members of any
such committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.
c. Neither the designation of any such committee, the delegation thereto of
authority, nor action by such committee pursuant to such authority shall alone
constitute compliance by any member of the Board of Directors, not a member of
the committee in question, with his responsibility to act in good faith, in a
manner he reasonably believes to be in the best interests of the Corporation,
and with such care as an ordinarily prudent person in a like position would use
under similar circumstances.
11
<PAGE>
Section 7. Place, Time, Notice, and Call of Directors' Meetings.
----------------------------------------------------
a. Meetings of the Board of Directors, regular or special, may be held
either within or without this state.
b. A regular meeting of the Board of Directors of the Corporation shall be
held for the election of officers of the Corporation and for the transaction of
such other business as may come before such meeting as promptly as practicable
after the annual meeting of the shareholders of this Corporation without the
necessity of other notice than this Bylaw. Other regular meetings of the Board
of Directors of the Corporation may be held at such times and at such places as
the Board of Directors of the Corporation may from time to time resolve without
other notice than such resolution. Special meetings of the Board of Directors
may be held at any time upon call of the Chairman of the Board or the President
or a majority of the Directors of the Corporation, at such time and at such
place as shall be specified in the call thereof. Notice of any special meeting
of the Board of Directors must be given at least two (2) days prior thereto, if
by written notice delivered personally; or at least five (5) days prior thereto,
if mailed; or at least two (2) days prior thereto, if by telegram; or at least
two (2) days prior thereto, if by telephone. If such notice is given by mail,
such notice shall be deemed to have been delivered when deposited with the
United States Postal Service addressed to the business address of such director
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed delivered when the telegram is delivered to the telegraph company. If
notice is given by telephone, such notice shall be deemed delivered when the
call is completed.
c. Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
d. Neither the business to be transacted at, nor the purpose of any regular
or special meeting of the Board of Directors need be specified ins the notice or
waiver of notice of such meeting.
e. A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
f. Members of the Board of Directors may participate in a meeting of such
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
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Section 8. Action by Directors Without a Meeting.
-------------------------------------
Any action required by the Colorado Corporation Code to be taken at a
meeting of the Directors of the Corporation, or a committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so to
be taken, signed by all of the directors, or all of the members of the
committee, as the case may be, is filed in the minutes of the proceedings of the
Board or of the committee. Such consent shall have the same effect as a
unanimous vote.
Section 9. Compensation.
------------
The directors and members of the Executive and any other committee of the
Board of Directors shall be entitled to such reasonable compensation for their
services and on such basis as shall be fixed from time to time by resolution of
the Board of Directors. The Board of Directors and members of any committee of
that Board of Directors shall be entitled to reimbursement for any reasonable
expenses incurred in attending any Board or committee meeting. Any director
receiving compensation under this section shall not be prevented from serving
the Corporation in any other capacity and shall not be prohibited from receiving
reasonable compensation for such other services.
Section 10. Resignation.
-----------
Any Director of the Corporation may resign at any time without acceptance
by the Corporation. Such resignation shall be in writing and may provide that
such resignation shall take effect immediately or on any future date stated in
such notice.
Section 11. Removal.
-------
Any Director of the Corporation may be removed for cause by a majority vote
of the other members of the Board of Directors as then constituted or with or
without cause by the vote of the holders of a majority of the outstanding shares
of capital stock shareholders of the Corporation called for such purpose.
Section 12. Vacancies.
---------
In the event that a vacancy shall occur on the Board of Directors of the
Corporation whether because of death, resignation, removal, an increase in the
number of directors or any other reason, such vacancy may be filled by the vote
of a majority of the remaining directors of the Corporation even though such
remaining directors represent less than a quorum. An increase in the number of
directors shall create vacancies for the purpose of this section. A director of
the Corporation elected to fill a vacancy shall hold office for the unexpired
term of his predecessor, or in the case of an increase in the number of
directors, until the election and qualification of directors at the next annual
meeting of the shareholders.
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ARTICLE IV
Officers
--------
Section 1. Election; Number; Terms of Office.
---------------------------------
a. The officers of the Corporation shall consist of a Chairman of the
Board, a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors at such time and in such manner as may be prescribed
by these Bylaws. Such other officers and assistant officers and agents as may be
deemed necessary may be elected or appointed by the Board of Directors.
b. All officers and agents, as between themselves and the Corporation,
shall have such authority and perform such duties in the management of the
Corporation as are provided in these Bylaws, or as may be determined by
resolution of the Board of Directors not inconsistent with these Bylaws.
c. Any two (2) or more offices may be held by the same person except the
offices of the President and Secretary.
d. A failure to elect a Chairman of the Board, President, a Secretary and a
Treasurer shall not affect the existence of the Corporation.
Section 2. Removal.
-------
An officer of the Corporation shall hold office until the election and
qualification of his successor; however, any officer of the Corporation may be
removed from office by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of any officer shall not of itself create any contract
right to employment or compensation.
Section 3. Vacancies.
---------
Any vacancy in any office from any cause may be filled for the unexpired
portion of the term of such office by the Board of Directors.
Section 4. Powers and Duties.
-----------------
a. The Chairman of the Board shall be the Chief Executive Officer of the
Corporation. The Chairman of the Board shall preside at all meetings of the
shareholders and of the Board of Directors. Except where by law the signature of
the President is required or unless the Board of Directors shall rule otherwise,
the Chairman of the Board shall possess the same power as the President to sign
all certificates, contracts and other instruments of the Corporation which may
be authorized by the Board of Directors. Unless a Chairman of the Board is
specifically elected, the President shall be deemed to be the Chairman of the
Board.
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b. The President shall be the Chief Operating Officer of the Corporation.
He shall be responsible for the general day-to-day supervision of the business
and affairs of the Corporation. He shall sign or countersign all certificates,
contracts or other instruments of the Corporation as authorized by the Board of
Directors. He may, but need not, be a member of the Board of Directors. In the
absence of the Chairman of the Board, the President shall be the Chief Executive
Officer of the Corporation and shall preside at all meetings of the shareholders
and the Board of Directors. He shall make reports to the Board of Directors and
shareholders. He shall perform such other duties as are incident to his office
or are properly required of him by the Board of Directors. The Board of
Directors will at all times retain the power to expressly delegate the duties of
the President to any other officer of the Corporation.
c. The Vice-President(s), if any, in the order designated by the Board of
Directors, shall exercise the functions of the President during the absence,
disability, death, or refusal to act of the President. During the time that any
Vice-President is properly exercising the functions of the President, such
Vice-President shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice-President shall have such other
duties as are assigned to him from time to time by the Board of Directors or by
the President of the Corporation.
d. The Secretary of the Corporation shall keep the minutes of the meetings
of the shareholders of the Corporation and, if so requested, the Secretary shall
keep the minutes of the meetings of the Board of Directors of the Corporation.
The Secretary shall be the custodian of the minute books of the Corporation and
such other books and records of the Corporation as the Board of Directors of the
Corporation may direct. The Secretary shall make or cause to be made all proper
entries in all corporate books that the Board of Directors of the Corporation
may direct. The Secretary shall make or cause to be made all proper entries in
all corporate books that the Board of Directors of the Corporation shall have
the general responsibility for maintaining the stock transfer books of the
Corporation, or of supervising the maintenance of the stock transfer books of
the Corporation by the transfer agent, if any, of the Corporation. The Secretary
shall be the custodian of the corporate seal of the Corporation and shall affix
the corporate seal of the Corporation on contracts and other instruments as the
Board of Directors of the Corporation may direct. The Secretary shall perform
such other duties as are assigned to him from time to time by the Board of
Directors or the President of the Corporation. e. The Treasurer of the
Corporation shall have custody of all funds and securities owned by the
Corporation. The Treasurer shall cause to be entered regularly in the proper
books of account of the Corporation full and accurate accounts of the receipts
and disbursements of the Corporation. The Treasurer of the Corporation shall
render a statement of cash, financial and other accounts of the Corporation
whenever he is directed to render such a statement by the Board of Directors or
by the President of the Corporation. The Treasurer shall at all reasonable times
make available the Corporation's books and financial accounts to any Director of
the Corporation during normal business hours. The Treasurer shall perform all
other acts incident to the office of the Treasurer of the Corporation, and he
shall have such other duties as are assigned to him from time to time by the
Board of Directors or the President of the Corporation.
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f. Other subordinate or assistant officers appointed by the Board of
Directors or by the President, if such authority is delegated to him by the
Board of Directors, shall exercise such powers and perform such duties as may be
delegated to them by the Board of Directors or by the President, as the case may
be.
g. In case of the absence or disability of any officer of the Corporation
and of any person authorized to act in his place during such period of absence
or disability, the Board of Directors may from time to time delegate the powers
and duties of such officer to any other officer or any director or any other
person whom it may select.
Section 5. Salaries
--------
The salaries of all Officers of the Corporation shall be fixed by the Board
of Directors. No officer shall be ineligible to receive such salary by reason of
the fact that he is also a Director of the Corporation and receiving
compensation therefor.
ARTICLE V
Loans to Employees and Officers:
--------------------------------
Guaranty of Obligations of Employees and Officers
-------------------------------------------------
This Corporation may lend money to, guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of a
subsidiary, including any officer or employee who is a Director of the
Corporation or of a subsidiary, whenever, in the judgment of the Directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
Corporation. The loan, guaranty or other assistance may be with or without
interest, and may be unsecured, or secured in such manner as the Board of
Directors shall approve including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Article shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of this Corporation at common law
or under any statute.
ARTICLE VI
STOCK CERTIFICATES; VOTING TRUSTS; TRANSFERS
--------------------------------------------
Section 1. Certificates Representing Shares.
--------------------------------
a. Every holder of shares in this Corporation shall be entitled to one or
more certificates, representing all shares to which he is entitled and such
certificates shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary of the Corporation and may be sealed with
the seal of the Corporation or a facsimile thereof. The signatures of the
President or Vice President and the Secretary or Assistant Secretary may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar, other than the Corporation itself or an employee of the
Corporation. In case any officer who signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be used by the Corporation with the same
effect as if he were such officer at the date of its issuance.
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b. Each certificate representing shares shall state upon the face thereof:
(i) the name of the Corporation; (ii) that the Corporation is organized under
the laws of this state; (iii) the name of the person or persons to whom issued;
(iv) the number and class of shares, and the designation of the series, if any,
which such certificate represents; and (v) the par value of each share
represented by such certificate, or a statement that the shares are without par
value.
c. No certificate shall be issued for any shares until such share if fully
paid.
Section 2. Transfer Book.
-------------
The Corporation shall keep at its registered office of principal place of
business or in the office of its transfer agent or registrar, a book (or books
where more than one kind, class, or series of stock is outstanding) to be known
as the Stock Book, containing the names, alphabetically arranged, addresses and
Social Security numbers of every shareholder, and the number of shares of each
kind, class or series of stock held of record. Where the Stock Book is kept in
the office of the transfer agent, the Corporation shall keep at its office in
the State of Colorado copies of the stock lists prepared from said Stock Book
and sent to it from time to time by said transfer agent. The Stock Book or stock
lists shall show the current status of the ownership of shares of the
Corporation provided, if the transfer agent of the Corporation be located
elsewhere, a reasonable time shall be allowed for transit or mail.
Section 3. Transfer of Shares.
------------------
a. The name(s) and address(s) of the person(s) to whom shares of stock of
this Corporation are issued, shall be entered on the Stock Transfer Books of the
Corporation, with the number of shares and date of issuance.
b. Transfer of shares of the Corporation shall be made on the Stock
Transfer Books of the Corporation by the Secretary or the transfer agent only
when the holder of record thereof or the legal representative of such holder of
record or the attorney-in-fact of such holder of record, authorized by power of
attorney duly executed and filed with the Secretary or transfer agent of the
Corporation shall surrender the Certificate representing such shares for
cancellation. Lost, destroyed or stolen Stock Certificates shall be replaced
pursuant to Section 5 of this Article VI. c. The person or persons in whose
names shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner of such shares for all purposes, except as otherwise
provided pursuant to Section 10 and 11 of Article II, or Section 4 of this
Article VI.
Section 4. Voting Trusts.
-------------
a. Any number of shareholders of the Corporation may create a voting trust
for the purpose of conferring upon a trustee or trustees the right to vote or
otherwise represent their shares, for a period not to exceed ten (10) years, by:
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<PAGE>
(i) entering into a written voting trust; (ii) depositing a counterpart of the
agreement with the Corporation at its registered office; and (iii) transferring
their shares to such trustee or trustees for the purposes of this Agreement.
Prior to the recording of the Agreement, the shareholder concerned shall tender
the stock certificate(s) described therein to the corporate secretary who shall
note on each certificate:
"This Certificate is subject to the provisions of a
voting trust agreement dated ___________________, recorded
in Minute Book __________________, of the Corporation.
-------------------------
Secretary"
b. Upon the transfer of such shares, voting trust certificates shall be
issued by the trustee or trustees to the shareholders who transfer their share
in trust. Such trustee or trustees shall keep a record of the holders of the
voting trust certificates evidencing a beneficial interest in the voting trust,
giving the names and addresses of all such holders and the number and class of
the shares in respect of which the voting trust certificates held by each are
issued, and shall deposit a copy of such record with the Corporation at its
registered office.
b. Upon the transfer of such shares, voting trust certificates shall be
issued by the trustee or trustees to the shareholders who transfer their shares
in trust. Such trustee or trustees shall keep a record of the holders of the
voting trust certificates evidencing a beneficial interest in the voting trust,
giving the names and addresses of all such holders and the number and class of
the shares in respect of which the voting trust certificates held by each are
issued, and shall deposit a copy of such record with the Corporation at its
registered office.
c. The counterpart of the voting trust agreement and the copy of such
record so deposited with the Corporation shall be subject to the same right of
examination by a shareholder of the Corporation, in person or by agent or
attorney, as are the books and records of the Corporation, and such counterpart
and such copy of such record shall be subject to examination by any holder of
record of voting trust certificates either in person or by agent or attorney, at
any reasonable time for any proper purpose.
d. At any time before the expiration of a voting trust agreement as
originally fixed or as extended one or more times under this Article VI,
Subsection 4(d) one or more holders of voting trust certificates may, by
agreement in writing, extend the duration of such voting trust agreement,
nominating the same or substitute trustee or trustees, for an additional period
not exceeding ten (10) years. Such extension agreement shall not affect the
rights or obligations of persons not parties to the agreement, and such persons
shall be entitled to remove their shares from the trust and promptly to have
their stock certificates reissued upon the expiration date of the original term
of the voting trust agreement. The extension agreement shall in every respect
comply with and be subject to all the provisions of this Article VI, Section 4
applicable to the original voting trust agreement except that the ten (10) year
maximum period of duration shall commence on the date of adoption of the
extension agreement.
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e. The trustees under the terms of the agreements entered into under the
provisions of this Article VI, Section 4 shall not acquire the legal title to
the shares but shall be vested only with the legal right and title to the voting
power which is incident to the ownership of the shares.
Section 5. Lost, Destroyed, or Stolen Certificates.
---------------------------------------
No certificate representing shares of the stock in the Corporation shall be
issued in place of any Certificate alleged to have been lost, destroyed, or
stolen except on production of evidence, satisfactory to the Board of Directors,
of such loss, destruction or theft, and, if the Board of Directors so requires,
upon the furnishing of an indemnity bond in such amount (but not to exceed twice
the fair market value of the shares represented by the Certificate) and with
such terms and with such surety as the Board of Directors may, in its
discretion, require.
ARTICLE VII
Books and Records
-----------------
a. The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees of Directors.
b. Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
c. Any person who shall have been a holder of record of one quarter of one
percent of shares or of voting trust certificates therefor at least six months
immediately preceding his demand or shall be the holder of record of, or the
holder of record of voting trust certificates for, at least five (5%) percent of
the outstanding shares of any class or series of the Corporation, upon written
demand stating the purpose thereof, shall have the right to examine, in person
or by agent or attorney, at any reasonable time or times, for any proper
purpose, its relevant books and records of account, minutes and record of
shareholders and to make extracts therefrom.
d. No shareholder who within two (2) years has sold or offered for sale any
list of shareholders or of holders of voting trust certificates for shares of
this Corporation or any other Corporation; has aided or abetted any person in
procuring any list of shareholders or of holders of voting trust certificates
for any such purpose; or has improperly used any information secured through any
prior examination of the books and records of account, minutes, or record of
shareholders or of holders of voting trust certificates for shares of the
Corporation or any other Corporation; shall be entitled to examine the documents
and records of the Corporation as provided in Subsection (c) of this Article
VII. No shareholder who does not act in good faith or for a proper purpose in
making his demand shall be entitled to examine the documents and records of the
Corporation as provided in Subsection (c) of this Article VII.
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e. Unless modified by resolution of the shareholders, this Corporation
shall prepare not later than four (4) months after the close of each fiscal
year:
(i) A balance sheet showing in reasonable detail the financial
conditions of the Corporation as of the date of its fiscal year.
(ii) A profit and loss statement showing the results of its operation
during its fiscal year.
f. Upon the written request of any shareholder or holder of voting trust
certificates for shares of the Corporation, the Corporation shall mail to such
shareholder or holder of voting trust certificates a copy of its most recent
balance sheet and profit and loss statement.
g. Such balance sheets and profit and loss statements shall be filed and
kept for at least five (5) years in the registered office of the Corporation in
this state and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates.
ARTICLE VIII
Dividends
---------
The Board of Directors of the Corporation may, from time to time, declare
and the Corporation may pay dividends on its shares in cash, property or its own
shares, except when the Corporation is insolvent or when the payment thereof
would render the Corporation insolvent subject to the following provisions:
a. Dividends in cash or property may be declared and paid, except as
otherwise provided in this Article VIII, only out of the unreserved and
unrestricted earned surplus of the Corporation or out of capital surplus,
however arising, but each dividend paid out of capital surplus shall be
identified as a distribution of capital surplus, and the amount per share paid
from such capital surplus shall be disclosed to the shareholders receiving the
same concurrently with the distribution.
b. Dividends may be declared and paid in the Corporation's treasury shares.
c. Dividends may be declared and paid in the Corporation's authorized but
unissued shares out of any unreserved and unrestricted surplus of the
Corporation upon the following conditions:
(i) If a dividend is payable in the Corporation's own shares having a
par value, such shares shall be issued at not less than the par value thereof
and there shall be transferred to stated capital at the time such dividend is
paid an amount of surplus equal to the aggregate par value of the shares to be
issued as a dividend.
20
<PAGE>
(ii) If a dividend is payable in the Corporation's own shares without
par value, such shares shall be issued at such stated value as shall be fixed by
the Board of Directors by resolution adopted at the time such dividend is
declared, and there shall be transferred to stated capital at the time such
dividend is paid an amount of surplus equal to the aggregate stated value so
fixed in respect of such shares; and the amount per share so transferred to
stated capital shall be disclosed to the shareholders receiving such dividend
concurrently with the payment thereof.
d. No dividend payable in shares of any class shall be paid to the holders
of shares of any other class unless the Articles of Incorporation so provide or
such payment is authorized by the affirmative vote or written consent of the
holders of at least a majority of the outstanding shares of the class in which
the payment is to be made.
e. A split up or division of the issued shares of any class into a greater
number of shares of the same class without increasing the stated capital of the
Corporation shall not be construed to be a stock dividend within the meaning of
this Article VIII.
ARTICLE IX
Indemnification
---------------
Section 1. Action, etc. Other Than by or in the Right of the Corporation.
-------------------------------------------------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding or investigation, whether civil, criminal or administrative,
and whether external or internal to the Corporation, (other than a judicial
action or suit brought by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or that, being or having been such a director, officer, employee or
agent, he is or was serving at the request of the Corporation as a director,
officer, employee, or trustee or agent of another corporation, partnership,
joint venture, trust or other enterprise (all such persons being referred to
hereafter as an "Agent"), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, or any appeal
therein, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe such conduct was unlawful. The termination of any action, suit or
proceeding -- whether by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent -- shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that such
person had reasonable cause to believe that his conduct was unlawful.
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Section 2. Action, etc., by or in the Right of the Corporation.
---------------------------------------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed judicial
action or suit brought by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was an Agent (as
defined above) against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense, settlement or appeal
of such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for gross
negligence or willful misconduct in the performance of his or her duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. Determination of Right of Indemnification.
-----------------------------------------
Any indemnification under Section 1 or 2 (unless ordered by a court) shall
be made by the Corporation unless a determination is reasonably and promptly
made (i) by the Board by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or, even if obtainable, if a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders, that such person acted in bad faith and in a manner that such
person did not believe to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal proceeding, that such person
believed or had reasonable cause to believe that his conduct was unlawful.
Section 4. Indemnification Against Expenses of Successful Party.
----------------------------------------------------
Notwithstanding the other provisions of this Article, to the extent that an
Agent has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice or the settlement of an
action without admission of liability, in defense of any proceeding or in
defense of any claim, issue or matter therein, or on appeal from any such
proceeding, action, claim or matter, such Agent shall be indemnified against all
expenses incurred in connection therewith.
Section 5. Advances of Expenses.
--------------------
Except as limited by Section 6 of this Article, costs, charges and expenses
(including attorneys' fees) incurred in any action, suit, proceeding or
investigation or any appeal therefrom shall be paid by the Corporation in
advance of the final disposition of such matter, if the Agent shall undertake to
repay such amount in the event that it is ultimately determined, as provided
herein, that such person is not entitled to indemnification. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made by the Board of Directors by a majority vote of a
quorum of disinterested directors, or (if such a quorum is not obtainable or,
even if obtainable, a quorum of disinterested directors so directs) by
independent legal counsel in a written opinion, that, based upon the facts known
to the Board or counsel at the time such determination is made, such person
22
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acted in bad faith and in a manner that such person did not believe to be in or
not opposed to the best interest of the Corporation, or, with respect to any
criminal proceeding, that such person believed or had reasonable cause to
believe his conduct was unlawful. In no event shall any advance be made in
instances where the Board of independent legal counsel reasonably determines
that such person deliberately breached his duty to the Corporation or its
shareholders.
Section 6. Right of Agent to Indemnification Upon Application; Procedure
Upon Application.
----------------------------------------------------------------
Any indemnification under Sections 1, 2 and 4 or advance under Section 5 of
this Article, shall be made promptly, and in any event within ninety (90) days,
upon the written request of the Agent, unless with respect to applications under
Sections 1, 2 or 5, a determination is reasonably and promptly made by the Board
of Directors by a majority vote of a quorum of disinterested directors that such
Agent acted in a manner set forth in such Sections as to justify the
Corporation's not indemnifying or making an advance to the Agent. In the event
no quorum of disinterested directors is obtainable, the Board of Directors shall
promptly direct that independent legal counsel shall decide whether the Agent
acted in the manner set forth in such Sections as to justify the Corporation's
not indemnifying or making an advance to the Agent. The right to indemnification
or advances as granted by this Article shall be enforceable by the Agent in any
court of competent jurisdiction, if the Board or independent legal counsel
denies the claim, in whole or in part, or if no disposition of such claim is
made within ninety (90) days. The Agent's costs and expenses incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
Section 7. Contribution.
------------
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in this Article is held by a court of
competent jurisdiction to be unavailable to an indemnitee in whole or part, the
Corporation shall, in such an event, after taking into account, among other
things, contributions by other directors and officers of the Corporation
pursuant to indemnification agreements or otherwise, and, in the absence of
personal enrichment, acts of intentional fraud or dishonesty or criminal conduct
on the part of the Agent, contribute to the payment of Agent's losses to the
extent that, after other contributions are taken into account, such losses
exceed: (i) in the case of a director of the Corporation or any of its
subsidiaries who is not an officer of the Corporation or any of such
subsidiaries, the amount of fees paid to him for serving as a director during
the 12 months preceding the commencement of the suit, proceeding or
investigation; or (ii) in the case of a director of the Corporation or any of
its subsidiaries who is also an officer of the Corporation or any of such
subsidiaries, the amount set forth in clause (i) plus 5% of the aggregate cash
compensation paid to said director for service in such office(s) during the 12
months preceding the commencement of the suit, proceeding or investigation; or
(iii) in the case of an officer of the Corporation or any of its subsidiaries,
5% of the aggregate cash compensation paid to such officer of service in such
office(s) during the 12 months preceding the commencement of such suit,
proceeding or investigation.
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Section 8. Other Rights and Remedies.
-------------------------
The indemnification provided by this Article shall not be deemed exclusive
of, and shall not affect, any other rights to which an Agent seeking
indemnification may be entitled under any law, Bylaw, or charter provision,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be an
Agent and shall inure to the benefit of the heirs, executors and administrators
of such a person. All rights to indemnification under this Article shall be
deemed to be provided by a contract between the Corporation and the Agent who
serves in such capacity at any time while these Bylaws and other relevant
provisions of the general corporation law and other applicable law, if any are
in effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing.
Section 9. Insurance.
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Upon resolution passed by the Board, the Corporation may purchase and
maintain insurance on behalf of any person who is or was an Agent against any
liability asserted against such person and incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of this Article. The Corporation may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
Section 10. Constituent Corporation.
-----------------------
For the purposes of this Article, references to the "Corporation" include
all constituent corporations absorbed in a consolidation or merger as well as
the resulting or surviving corporation, so that any person who is or was a
director, officer, employee, agent or trustee of such a constituent corporation
or who, being or having been such a director, officer, employee or trustee, is
or was serving at the request of such constituent corporation as a director,
officer, employee, agent or trustee of another corporation, partnership, joint
venture, trust or other enterprise shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation as such person would if he had served the resulting or surviving
corporation in the same capacity.
Section 11. Other Enterprises, Fines and Serving at Corporation's Request.
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For purposes of this Article, references to "other enterprise" in Sections
1 and 10 shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service by Agent as director, officer, employee, trustee or
agent of the Corporation which imposes duties on, or involves services by, such
Agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
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Section 12. Savings Clause.
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If this Article or any portion thereof shall be invalidated on any ground
by any court of competent jurisdiction, then the Corporation shall nevertheless
indemnify each Agent as to expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement with respect to any action, suit, appeal,
proceeding or investigation, whether civil, criminal or administrative, and
whether internal or external, including a grand jury proceeding and an action or
suit brought by or in the right of the Corporation, to the full extent permitted
by any applicable portion of this Article that shall not have been invalidated,
or by any other applicable law.
ARTICLE X
Amendment of Bylaws
-------------------
a. The Board of Directors shall have the power to amend, alter, or repeal
these Bylaws, and to adopt new Bylaws, from time to time.
b. The shareholders of the Corporation, may, at any annual meeting of the
shareholders of the Corporation or at any special meeting of the shareholders of
the Corporation called for the purpose of amending these Bylaws, amend, alter,
or repeal these Bylaws, and adopt new Bylaws, from time to time.
c. The Board of Directors shall not have the authority to adopt or amend
any Bylaw if such new Bylaw of such amendment would be inconsistent with any
Bylaw previously adopted by the shareholders of the Corporation. The
shareholders may prescribe in any Bylaw made by them that such Bylaw shall not
be altered, amended or repealed by the Board of Directors.
ARTICLE XI
Shareholder Agreements
----------------------
Unless the shares of this Corporation are listed on a national securities
exchange or are regularly quoted by licensed securities dealers and brokers, all
the shareholders of this Corporation may enter into agreements relating to any
phase of business and affairs of the Corporation and which may provide for,
among other things, the election of directors of the Corporation in a manner
determined without reference to the number of shares of capital stock of the
Corporation owned by its shareholders, the determination of management policy,
and division of profits. Such agreement may restrict the discretion of the Board
of Directors and its management of the business of the Corporation or may treat
the Corporation as if it were a partnership or may arrange the relationships of
the shareholders in a manner that would be appropriate only among partners. In
the event such agreement shall be inconsistent in whole or in part with the
Articles of Incorporation and/or Bylaws of the Corporation, the terms of such
agreement shall govern. Such agreement shall be binding upon any transferee of
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shares of this corporation provided such transferee has actual notice thereof or
a legend referring to such agreement is noted on the face or back of the
certificate or certificates representing the shares transferred to such
transferee.
ARTICLE XII
Fiscal Year
-----------
The Fiscal Year of this Corporation shall be determined by the Board of
Directors.
Date: 9/28/94 /s/ David Reitsema
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Secretary (Acting)
[S E A L]
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