FORM 10-KSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE FISCAL YEAR ENDED
December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED] for the transition period from
____________ to ____________
Commission file number: 33-22832-D
<PAGE>
ATI NETWORKS, INC.
(Name of small business issuer in its charter)
COLORADO 84-1089801
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
460 Cedar Street
Fond du Lac, Wisconsin 54935
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code:
(920) 922-7030
Securities registered pursuant to Section 12(b) of the
Securities Exchange Act:
Title of each class Name of each exchange on which registered
NONE N/A
Securities registered pursuant to section 12(g) of the
Securities Exchange Act:
COMMON STOCK,
NO PAR VALUE PER SHARE N/A
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ]
State issuer's revenues for its most recent fiscal year: $83,525
As of June 22, 1998, 3,184,357 shares of the issuer's Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
See Part III, Item 13, Exhibits and Reports on Form 8-K
Transitional Small Business Disclosure Format: Yes No X
<PAGE> 1
PART I
ITEM 1. DESCRIPTION OF BUSINESS
EXECUTIVE SUMMARY
The Company was founded as a Research and Development Company to create and
license leading edge software applications. In December of 1995, the Company's
first product, AutoNav for Windows, was selected by Automotive Engineering
Magazine readers as one of the Top 50 Products of the Year. In 1996, with its
LogiTrak software, ATI became the first company in the world to enable
wireless communications and vehicle tracking over the INTERNET. In 1997, ATI
completed the development and recently began marketing of two proprietary
website properties. The first is a fully automated, global real estate
exchange website known as ARealGem.com. The second is ArtGems.com, the first
fully automated, online art auction on the Internet. Having already received
over 6,000 timeshare listings for aRealGem.com in the past 90 days, and
$7,000,000 of art inventory for ArtGems.com, the Company is well on its way
to meeting its sales objectives for these sites in 1998.
The company is a C-Corporation with its principal business offices located at
460 Cedar Street, Fond du Lac, Wisconsin.
Business
The company has developed proprietary software technologies for real time data
communications over the Internet, vehicle tracking, vehicle navigation, and an
informational database Internet website. The Company designs and develops the
technologies it sells, both with its own in-house engineers and privately
contracted developers. When outside developers are used, as well as with its
employee engineers and scientists, all ownership, trade secrets and
proprietary rights to the technology is assigned to ATI.
Future revenue sources include development fees, software licensing fees,
Internet advertising fees, wireless communications fees, and the sale of
mobile data communications and tracking equipment. Future sales will also
include maintenance (upgrades) for software map data bases, software mapping
applications, and fees for properties sold on its proprietary real estate
database website.
<PAGE> 2
The Company is now in the growth stage of business, having begun international
sales of its software technologies and use of its Internet websites.
Products
ATI has developed the following products:
NavQuest - Mapping, Routing, and Navigation Software. A CD-ROM product that
includes all US and many Canadian streets and highways on one CD. NavQuest
also contains advanced routing features found in more expensive programs. An
earlier version of this mapping software, under the tradename AutoNav,
received Automotive Engineering Magazine's prestigious Top 50 Products Award.
Sale of the mapping, routing, and navigation software product is now in the
growth stage. Having shipped just over 5,000 copies in 1996, the Company was
back ordered for 6,000 units in January of 1998 alone. Management expects to
ship over 100,000 units in 1998. They plan to follow the US/Canadian product
with extensions to their line, which will include versions for distribution
in France, Germany, and the United Kingdom.
LogiTrak - Map Based Tracking and Messaging Via the INTERNET- Incorporating
the NavQuest mapping and routing engines, LogiTrak includes all the
functionality of NavQuest plus enabling the user to do multiple vehicle
tracking and wireless data communications over the INTERNET. LogiTrak can be
configured to operate in a regional mode without an INTERNET connection using
a local wireless device such as the MicroTracker.
Internet WebSites - At the end of 1997, ATI completed the development and
began marketing two proprietary website properties, www.aRealGem.com and
www.ArtGems.com.
Known on the web as arealgem.com, (pronounced A Real Gem), the site enables
Timeshare property buyers and sellers around the world to connect with each
other directly in one place on the Internet. Visitors to the site may view or
search for available properties for sale in 70 countries around the world. By
following the easy, step-by-step instructions to list property(s) for sale,
individual users complete an on-line listing form, submit a picture, or video
file of the property, and all of their property information is immediately
available for viewing by any of the 70 million users of the Internet. The
Company provides a complete buyer's service to online timeshare buyers by
handling escrow and title insurance for every timeshare sold on its sites.
<PAGE> 3
When creating its web sites, the Company's engineers creatively utilized the
latest active server technology from Microsoft, to provide online buyers
access to a large database of inventory in a compelling and exciting, live
auction environment. The site allows multiple auctions to take place
simultaneously by enabling participants to scan through all of the currently
available inventory, view digital pictures of each item, then make bids on
their favorite(s). Multiple bids can be made on multiple items by anyone
logged onto the sites, with the Company's web server acting as the traffic cop
for all auction transactions. Imagine a combination of a stock exchange and
art, and you have the format for ArtGems. Ditto for timeshares. The result is
a dynamic and friendly environment to engage in electronic exchanges of art
and timeshare properties.
Technology
ATI, Inc., is pleased to announce the establishment of the world's first fully
automated, global real estate exchange web site. By applying sophisticated
database technology to the Internet, ATI has created an easy to use, yet
powerful, real estate information website that can be viewed by any Internet
Web Browser. Unlike other real estate sites established solely for Realtors,
the aRealGem website now makes it easy for everyone, realtor and layman alike
to list their property for sale on the most comprehensive high-traffic,
Internet website dedicated to real estate sales of all kinds. The aRealGem
website was formed to use ATI's proprietary Internet technology to facilitate
and promote the listing and sale of properties in 70 countries to the global
online community, by providing a convenient, central point of exchange.
Known on the web as arealgem.com, (pronounced A Real Gem), the site enables
real estate property buyers and sellers around the world to connect with each
other directly in one place on the world wide web. For Sale by Owner (FSBO)
types and Realtors alike can now advertise their properties to the global
community by going to the Real Gem website. Visitors to the site may view or
search for available properties for sale in 70 countries around the world. By
following the easy, step-by-step instructions to list property(s) for sale,
individual users complete an on-line listing form, submit a picture or video
file of the property, and all of their property information is immediately
available for viewing by any of the 70 million+ users of the Internet.
The Company charges a basic fee of $20 per month to submit a property listing
on the site, and currently is running a travel promotion that gives 2 nights
free lodging at major hotels and motels in many resort cities for every
listing submitted. The Company gives discounts to Realtors for submitting
large numbers of listings. The Company expects to receive over 20,000
listings.
<PAGE> 4
by the end of 1998, and to add 5,000 listings per month in 1999. There is no
charge to search and view properties for sale on the site.
When creating its web sites, the Company's engineers creatively utilized the
latest active server technology from Microsoft, to provide online buyers
access to a large database of inventory in a compelling and exciting, live
auction environment. The site allows multiple auctions to take place
simultaneously by enabling participants to scan through all of the currently
available inventory, view digital pictures of each item, then make bids on
their favorite(s). Multiple bids can be made on multiple items by anyone
logged onto the sites, with the Company's web server acting as the traffic cop
for all auction transactions. Imagine a combination of a stock exchange and
art, and you have the format for ArtGems. Ditto for timeshares. The result is
a dynamic and friendly environment to engage in electronic exchanges of art
and timeshare properties.
Market
The INTERNET and the World Wide Web
The INTERNET is a global collection of computer networks, linking millions of
public and private computers around the world. Historically, the INTERNET was
used by academic institutions and government agencies to exchange information
and send and receive electronic mail. A number of factors, including the
proliferation of communication-enabled personal computers, the availability of
intuitive, graphical software and wide accessibility to an increasingly robust
network infrastructure, have allowed widespread access to the INTERNET at a
rapidly declining cost, and have facilitated the emergence of the Web, a
client/server system of hyper-link, multimedia databases.
The Web enables non-technical users to easily access information on the
INTERNET and enables individuals or organizations to offer textual or
graphical and other information directly to end users. Users can easily access
information on the Web using client software known as Web "browsers." In
recent years, the Web has experienced a rapid increase in the number of
individual users. Price Waterhouse and International Data Corporation ("IDC")
have estimated that the number of INTERNET users will exceed 200 million
people by the end of 1999, from approximately 70 million in mid-1997; and an
October 1995 Commerce Net/Nielsen INTERNET Demographics Survey indicated that
approximately 18 million people in the U.S. and Canada had used the Web
during the three month period prior to the survey.
<PAGE> 5
Additionally, many businesses and individuals in developing countries have
purchased personal computers in increasing numbers, but lack access to
reliable telecommunications services in their area. Since these businesses and
individuals do not want to be left behind in the race for access to global
information, it is anticipated by all Internet research firms that growth in
developing nations will also increase at a rapid pace.
Marketing
The Company plans to promote the site nationally and internationally over the
Internet with banner ads on high traffic sites such as HomeNet, USAToday, and
YAHOO, that link directly to arealgem.com. Currently a travel promotion is
being offered in conjunction with Advantage Travel for each listing placed on
the site. The Company has partnered with CPNM, Cable/Print Network Marketing
Corp, a major national multimedia conglomerate, to manage the media rollout
and promotion of both the new RealGem website, as well as future Company
websites. By applying brand name development strategies, Company management
intends to position AREALGEM as the definitive source on the Internet to
advertise and exchange all types of real estate.
Advertising and Promotion
The Company's partnership agreement with CPNM, a US marketing firm that owns
interests in cable television networks, newspapers, magazines, and Direct
Broadcast satellite channels. Under the terms of the agreement, CPNM will
market and advertise arealgem.com through a variety of Direct Response
advertising promotions in its national media. These venues include Family
Guide magazine, hundreds of weekly newspapers, and Direct Response cable and
satellite television infomercials. In addition, CPNM will be nationally
advertising and promoting the Company's future media properties through these
same channels. The audience for this combined media blitz represents over 35
million US households. The partnership gives the Company recurring national
exposure for its consumer products through well established national media.
Additionally, the Company is working with editors of national magazines to
position its Internet consumer products as major brand names. The capital
investment the Company is seeking will help expand this national advertising
effort to rapidly build the site's brand name awareness.
<PAGE> 6
Over the past 90 days, the Company has secured exclusive, 24-month Internet
marketing rights with nationally known artists and publishers, for the online
sale of over $7,000,000 of art inventory on its ArtGems site and related
partner sites. Additional artist's and publisher's inventories are being added
weekly. Additionally, the company has received over 6,000 timeshare listings
for aRealGem.com. The company receives a minimum sales commission of $500 for
each of the timeshares purchased from the company's sites. The Company has
agreed to supply some of its inventory to Onsale.com, a publicly traded,
online general auction site with over $85 million in 1997 sales. OnSale states
in their Prospectus that they are the largest revenue generating, general
consumer auction site on the Internet. This website partner currently
generates between 500 and 700 orders per day of general merchandise sales.
Similar arrangements have been made with Home Shopping Network's online
auction, FirstAuction.com, under a lucrative revenue sharing agreement.
Company management believes the strategic relationships with many distribution
partners enhances the Company's brand name awareness among the Internet
community, and significantly improves its ability to achieve future revenue
and profit goals.
Market Definition
Mapping, Routing and Navigation Software
With NavQuest, the Company is competing in the computer mapping and routing
market. This market was composed of approximately 300,000 units last year,
according to IDC. ATI believes the major future trend in the industry will be
toward high quality, value oriented mapping product offerings. This market
will continue to grow substantially over the next decade as automobile
manufacturers and aftermarket automobile equipment manufacturers begin to
offer these products in the US, as they already do in Japan and Germany.
The US auto market is comprised of over 17 million new vehicles annually, and
is a virtually untapped market for vehicle navigation systems. Market research
by Automotive Engineering Magazine and the Big 3 automakers suggests the
vehicle navigation market will grow to over 3,000,000 units annually by the
year 2000. Company management expects the niche in which it competes to grow
over the next decade, as more automotive equipment and electronics
manufacturers seek to enter the US market with their product offerings. The
major forces affecting this change will be the falling cost of electronic
components, more travel by technically capable baby boomers, and the growing
use of personal computers.
<PAGE> 7
Map Based Tracking and Messaging
LogiTrak - This market includes over 10,000 long haul truck companies, and
thousands of local delivery companies that represent over 11 million pickup
and delivery vehicles in the US alone. Internationally, anyone that wishes to
track or communicate with mobile fleets, service technicians, or salespeople
can use ATI's tracking and data communications services. Sales are comprised
of LogiTrak software that is used by dispatchers in addition to the mobile
communication units for vehicles.
Wireless Telecommunications
Since the 1980's, the availability and use of wireless telecommunications
services has grown dramatically. The major growth sectors have included mobile
cellular telephone and specialized mobile radio which provide voice and data
communications, paging, and satellite-based mobile data services which provide
data communications. The growth in wireless services has been driven primarily
by technology advances and changes in telecommunications regulations and
consumer behavior. In addition, in less developed markets, wireless services
have become an alternative to fixed wireline services which are characterized
by poor quality, limited capacity and long installation waiting periods.
Wireless Communications systems increasingly are being adopted in developing
markets in order to more quickly implement fixed communications services. In
many international markets, including the People's Republic of China ("PRC").
India, Indonesia and Brazil, fixed telephone systems are inadequate to handle
demand with telephone line penetration ranging from less than 1% to less than
10% compared with over 50% in major developed markets. Wireless Communications
systems provide an attractive alternative to traditional copper and fiber
based fixed services with the potential to be implemented more quickly and at
lower cost than wireline services. The installation of Wireless Communications
systems minimizes the need to obtain right-of-ways and excavate existing roads
and infrastructure to lay copper or fiber cables. There is a rapidly growing
global demand for the use of wireless communications devices, and the
software that makes these devices communicate.
Position
The NavQuest software CDROM is a consumer mapping product that is useful,
inexpensive, and fun. Various demographic groups have a need for this product,
and ATI plans to tailor national advertising and marketing accordingly. The
product will continue to be revised and updated continuously to provide
increasingly better value as well as expanded demographic market penetration.
<PAGE> 8
Although the Company originally positioned its LogiTrak mobile data
communications and tracking software to meet the need of the transportation
industry to keep in touch with their drivers, it plans to expand the market to
others. With this goal in mind, ATI designed and developed LogiTrak as an easy
to use tool for anyone with a PC running Windows 95. Using a modular approach
to product development, the ATI development team has made it possible to add
communications drivers for cellular, CDPD, and PCS systems to the software's
existing satellite and RF communications capabilities. The Company expects
that by the addition of these drivers to the software, this it can expand the
potential market for users of its tracking software to include everyone with
a computer that uses the Windows 95 operating system.
All website products are positioned to provide the INTERNET web user with the
ability to use the Company's products anywhere in the world, with any of the
three major web browsers. The Company's server architecture is scaleable to
allow growth as usage of the Company's websites continues to grow.
Pricing
Pricing strategy for all products is to be competitive with the market. The
company arrives at pricing based on a combination of gross margin objectives
and market prices of similar product offerings. This pricing is reviewed
monthly to ensure that potential profits are not squandered, while enabling
the Company to continue selling its products at competitive pricing that
enable rapid increase in market share. Duplication and distribution costs are
less than 20% of current wholesale prices, so profit margins are adequate to
maintain this pricing strategy, while enabling ATI to reach its market share
objectives.
Distribution Channels
The distribution channels used for NavQuest mapping and routing navigation
software product are cataloguers, retailers, and tourist information
services. With the additional funding, ATI would like to extend distribution
to include national direct response TV ads. The Company began an ad campaign
just prior to the summer travel season, since the desire to plan for vacations
on one's home computer increases consumer response to advertising. These
channels make sense for delivering the product to the end user because of
customer profile and geography. Some of the competition uses the wholesaler
channel, while no competitor uses all of the same channels as ATI. ATI's
distribution strategy is advantageous because the partnership with CPNM into
established distribution channels enables ATI to increase market share of its
consumer products, without substantially sacrificing profit margins.
<PAGE> 9
To sell mobile data communications services effectively, ATI believes it is
necessary to recruit and train a technically competent, direct sales
organization, while also continuing to license reseller/partners to sell its
wireless communications technology. Upon completing funding, the Company plans
to hire additional sales people to market and license its products globally.
Customers
ATI's customers number in the tens of thousands and include the following
major companies:
WP6-34; AT&T
WP6-34; Harley Davidson
WP6-34; Bell South Mobility
WP6-34; Trimble Navigation Limited.
WP6-34; Flash, Inc.
Employees
Presently One Year from now
Operations 425
Clerical 26
Administrative 24
None of the Company's employees are subject to collective bargaining
agreements.
Copyrights/Patents
The Company owns the Copyrights and Trademarks for AutoNav, LogiTrak, and
NavQuest, as well as its website properties. Intellectual property and
trademark protection is an integral part of the corporate strategy to maximize
exclusivity and legally protect ownership of the Company's proprietary
technology properties in the marketplace.
None of the Company's business, products, or properties are subject to
material regulation (including environmental regulation) by federal, state,
or local governmental agencies.
The Company has recently acquired 87% of Waterford International, an inactive
public company domiciled in the State of Colorado. Within the next 30 days,
the Company intends to complete a one for one stock exchange with Waterford.
Subsequent to this transaction, it is management's intention to file
with the National Association of Securities Dealers, (NASD) for active
trading
<PAGE> 10
on the NASDAQ Over-the-Counter(OTC) Exchange. Upon final approval from
the NASD, all existing ATI shareholders will have free trading shares.
Insurance
The Company maintains director and officer ("D&O") liability insurance on a
claims made basis for all of its current officers and directors. Insurance
coverage under such policies is contingent upon a policy being in effect when
a claim is made, regardless of when the events which caused the claim
occurred. The cost and availability of such coverage has varied widely in
recent years. While the Company believes its insurance policies are adequate
in amount and coverage for its current operations, there can be no assurance
that the coverage maintained by the Company is sufficient to cover all future
claims or will continue to be available in adequate amounts or at a
reasonable cost.
Employees
As of June 22, 1998, the Company employed approximately 10 people.
None of the Company's employees is a member of a labor union, and the
Company considers its relations with its employees to be excellent.
IMPORTANT FACTORS RELATED TO
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The statements contained in this report that are not purely historical are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including statements regarding the Company's expectations, hopes, intentions
or strategies regarding the future. All forward-looking statements included
herein are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements. Among the
factors that could cause actual results to differ materially are the risk
factors which may be listed from time to time in the Company's reports on
Form 10-QSB, 10-KSB and registration statements filed under the Securities
Act.
<PAGE> 11
Forward-looking statements encompass the (i) expectation that the Company can
secure additional capital, (ii) continued expansion of the Company's operations
through joint ventures and acquisitions, (iii) success of existing and new
marketing initiatives undertaken by the Company, and (iv) success in controlling
the cost of services provided and general administrative expenses as a
percentage of revenues.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements were based on assumptions that the Company
would continue to expand, that capital will be available to fund the
Company's growth at a reasonable cost, that competitive conditions within
the industry would not change materially or adversely, that demand for the
Company's services would remain strong, that there would be no material
adverse change in the Company's operations or business, and that changes
in laws and regulations or court decisions will not adversely or significantly
alter the operations of the Company. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive, regulatory and market conditions, and future business decisions,
all of which are difficult or impossible to predict accurately and many of
which are beyond the control of the Company. Although the Company
believes that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the forward-looking information will prove
to be accurate. In light of the significant uncertainties inherent in the
forward-looking information included herein, the inclusion of such
information should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved.
ITEM 2. DESCRIPTION OF PROPERTY
Facilities
The Company currently has approximately 2000 square feet of office space and
1000 square feet of warehouse. Management believes its current facility will
be inadequate for the company's future needs, and has plans for the use of a
9,000 sq. ft. building upon confirmation of funding. CD-ROM disk duplication
and packaging is done both on-site and off site, with current software
duplication capacity at over 2,000,000 units per month.
<PAGE> 12
The Company believes that its rental costs are equal to or less than those
which would be charged for comparable space on month to month basis by a
third party. Rental space is available in the area, and the Company expects
to be able to continue to obtain a lease for adequate space at costs comparable
to its current rent.
Copyrights/Patents
The Company owns the Copyrights and Trademarks for AutoNav, LogiTrak, and
NavQuest, as well as its website properties. Intellectual property and
trademark protection is an integral part of the corporate strategy to maximize
exclusivity and legally protect ownership of the Company's proprietary
technology properties in the marketplace.
None of the Company's business, products, or properties are subject to
material regulation (including environmental regulation) by federal, state,
or local governmental agencies.
The following tabulates certain information with respect to the lease
currently executed between the Company and .
<TABLE>
<CAPTION>
Current
Square Monthly Lease
Location Footage Rental Lessor Expiration
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Executive Offices 2,500 $600.00 Wisconsin
460 Cedar Street Lumber Co.
Fond du Lac, WI
54935
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings to which the Company (or any of its directors
and officers in their capacities as such) is party or to which property of
the Company is subject is pending and no such material proceeding is known by
management of the Company to be contemplated.
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There has been no public market or trading in ATI Networks, Inc.
Common Stock, and there can be no assurance that an active trading
market will develop or be sustained. Provided a trading market does
develop in the future, the market price of the shares of Common
Stock is likely to be highly volatile and may be significantly affected
by factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new products by the
Company or its competitors, governmental regulatory action,
developments with respect to patents or proprietary rights and general
market conditions. The Company is plans to be listed on Standard and
Poor's Standard Corporation Description and Records.
The last reported sale price of the Common Stock on April 18,
1998 was $5.00 per share. The number of record holders of the Company's
Common Stock was one hundred twelve (112) on June 22, 1998.
Holders of Common Stock are entitled to receive such dividends as
may be declared by the Company's Board of Directors. No dividends on the
Common Stock have been paid by the Company, nor does the Company
anticipate that dividends will be paid in the foreseeable future.
As reflected in the price quotations above, there have not been
significant price fluctuations in the Company's Common Stock. Factors that
may cause or can cause market prices to fluctuate include any purchase or
sale of a significant number of securities during a relatively short time
period, quarterly fluctuations in results of operations, announcements of new
facilities, issuance of additional securities, registration of securities and
entrance of such securities into the public float, market conditions specific
to the Company's industry and market conditions in general. In addition, in
recent years the stock market in general has experienced significant price
and volume fluctuations. These fluctuations, which may be unrelated to the
operating performance of specific companies, have had a substantial effect on
the market price for many small capitalization companies such as the Company.
<PAGE> 14
Factors such as those cited above, as well as other factors that may be
unrelated to the operating performance of the Company, may adversely affect
the price of the Common Stock.
DESCRIPTION OF SECURITIES
The authorized capital stock of ATI Networks, Inc. consists of twenty
million (20,000,000) shares of Common Stock, no par value, of which
3,184,357 shares will be outstanding on the Distribution Record Date.
Holders of ATI Networks, Inc. Common Stock will be entitled to
one vote per share on all matters submitted to any vote of stockholders.
Cumulative voting for the election of directors is not permitted
and therefore the holders of a majority of the shares of ATI Networks,
Inc. Common Stock will be able to elect all of the directors. The
ATI Networks, Inc. Common Stock does not have preemptive rights
and is not convertible, redeemable or assessable. The holders of ATI
Networks, Inc. Common Stock are entitled to receive dividends as
may be declared by the Board of Directors out of funds legally
available therefor. See Dividends on ATI Networks, Inc.
Common Stock below. Upon liquidation or dissolution, holders
of ATI Networks, Inc. Common Stock are entitled to share
ratably in all net assets available for distribution to stockholders.
Restrictions of Transfer
Shares of ATI Networks, Inc. Common Stock held by non-
affiliate ATI Networks, Inc.'s stockholders will be freely transferable,
except for shares held by persons who may be deemed to be
"affiliates" of ATI Networks, Inc. under the Securities Act of 1933,
as amended (the "Securities Act"). Persons who may be deemed
to be affiliates of ATI Networks, Inc. generally include individuals
or entities that control, are controlled by, or are under common
control with ATI Networks, Inc. and may include certain officers
and directors of ATI Networks, Inc. as well as principal stockholders
of ATI Networks, Inc.. Persons who are affiliates of ATI Networks,
Inc. will be permitted to sell their shares of ATI Networks, Inc.
only pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements
of the Securities Act, such exemptions afforded by Section 4(1) or
Rule 701 of the Securities Act or Rule 144 thereunder.
<PAGE> 15
Dividends on ATI Networks, Inc. Common Stock
ATI Networks, Inc. does not intend to pay any dividends in
the foreseeable future and will follow a policy of retaining its
earnings for use in its operations. In addition, under its proposed
loan agreement, ATI Networks, Inc. will be prohibited from paying
cash dividends without prior approval of its lender banks.
Transfer Agents
The transfer agents for the ATI Networks, Inc. Common Stock
are American Securities Transfer, Inc., whose address is 1825
Lawrence Street, Suite 444, Denver, Colorado 80202-1817 and
whose telephone number is (303) 298-5370.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OR
PLAN OF OPERATION
The following discussion should be read in conjunction with the Financial
Statements and notes thereto.
The Company has been primarily focused on development of its software
products and recently began marketing its two primary CD-ROM software products.
Development and completion of the new Internet informational database website
occurred in July of this year. The Company has lacked adequate capital to mount
an effective national marketing campaign, and is now seeking additional
capital to build its sales and marketing group. The Company recently hired a
Sales and Marketing Vice President, and a Marketing Consultant with a history
of successful experience in the software and advertising media business.
Considering the high profit margins of the Company's CDROM and online software
products, and if the needs of capital and marketing talent are met, it is
anticipated by management that the company can be profitable this year.
<PAGE> 16
The software industry is extremely competitive and dynamic. Although the
Company has received a great deal of exposure in the national media, it
still must prove itself in the marketplace. The growth of the Internet as
a distribution medium for software and information has greatly expanded the
global market for the Company's core products, while at the same
time created new opportunities for the Company to create and sell
variations of its products. It is expected that with the additional exposure
of the Company and its products to the online community, that clones of
the Company's products will occur. The Company believes continuing to
expand exposure to the online community is a must to create brand name
recognition, while partnering and distribution contracts are expanded. The
Company expects to see rapid growth in its future sales figures,
since the recent signing of sales and distribution contracts with CPNM,
a major national media organization, HSN/FirstAuction.com, and OnSale.com,
the leader companies in online auction sales.
The existing gross margin (net sales less cost of such sales as presented
in accordance with generally accepted accounting principles) as a percentage
of sales for the last fiscal year is 65 %.
The anticipated gross margin for next year of operations is
approximately 65 %.
The trend of the Company sales margins is to stay the same or increase,
since the Company plans to focus its future sales and licenses on
software and advertising products.
Foreign sales as a percent of total sales for last fiscal year were
25%.
Domestic government sales as a percent of total domestic sales for last
fiscal year were 0%.
It is expected that the percentage of foreign sales will remain the
same, or increase slightly, since this closely represents the
approximate ratio of foreign users to total users of the Internet. The
Company does not market directly to the government and does not expect
any significant sales to come from this sector.
<PAGE> 17
After-tax earnings for the last fiscal year were $(371,782).
The net tangible book value of the Company at year end 1997 was
$ (82,555). For this purpose, net tangible book value means total assets
(exclusive of copyrights, patents, goodwill, research and development costs
and similar intangible items) minus total liabilities.
Like many early stage technology companies, the majority of the Company's
assets are intangible assets such as copyrights, trademarks, and Research and
Development costs. Current market values of technology companies is
substantially higher than their net tangible book value per share. Therefore,
the Company has priced this offering at a comparable price per share to
reflect current market offerings.
During the last 12 months, the Company entered into the following private
transactions for the sale of its stock:
1) 23,340 shares of Class A Common Stock were sold to unrelated private
parties at $5.00/share during 1997.
2) 2,000 shares of Class A Common Stock were issued to an employee for
services rendered at $5.00 per share in April, 1997.
ITEM 8. FINANCIAL STATEMENTS
The financial statements are included beginning at F-2. See page F-1
for the Index to the Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
From the date the Registrant commenced operations through any subsequent
interim period preceding the dismissal there have been no disagreements
with the former accountant on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope of procedure.
<PAGE> 18
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
Chief Executive Officer: Larry Bestor
Age: 46
Office Street Address: 460 Cedar Street
Fond du Lac, WI 54935
Telephone: (920) 922-7030
Duties include contract negotiation, capitalization, and business direction.
Prior to founding the company, Mr. Bestor served in a variety of management
positions. He has over 10 years experience in the financial services field, as
an investment consultant for IDS/American Express and Prudential Insurance
Company. Mr. Bestor is listed in U.S. Registry's WHO'S WHO of American
Colleges and Universities, and WHO'S WHO in Leading American Executives. He
attended the University of Wisconsin Engineering School, and has a Business
Degree from Marian College. Mr. Bestor is also a Director of the company.
VP Marketing: Blade Thomas
Age: 45
Office Street Address: Same as above
Mr. Thomas previously served as Vice President of Marketing for Entrepreneur
Magazine and MET-Rx. At MET-Rx USA, he conceptualized and engineered the
production of radio, print and TV ad campaigns to create demand for retail
distribution of the company's products. Over a three year period, using his
direct response ads to increase demand for the company's products, annual
sales grew from $7.2 million to over $65 million. While with Entrepreneur
Magazine, he was the leading executive responsible for the sale of over 200
"how to" business startup and operations manuals, the company's subscription
and news stand sales, as well as trade shows, and business seminars.
<PAGE> 19
Chief Financial Officer: William H. Geenen
Age: 59
Office Street Address: Same as above
Mr. Geenen has over 30 years of accounting experience prior to joining
the Company. He has previously served in various accounting positions at
Air Wisconsin, including Controller, Vice President & Treasurer, and CFO,
up until its sale to United Airlines in 1992. While there, he managed the
airline's initial public stock offering in 1980, a secondary offering
1982, and subsequent related transactions. Since 1992 he has been a
principal in the firm of W. H. Geenen and Associates, a financial management
firm. Mr. Geenen received a B.S. in Accounting from Marquette University
in 1959. Mr. Geenen is also a Director of the Company. Mr Geenen spends
an estimated 2-3 days per week on Company
business.
Secretary/ Treasurer: Susan Bestor
Age: 42
Office Street Address: Same as above
Susan has worked for the Company for the past 5 years, both part time
and full time. Job responsibilities include payroll, accounting, bookkeeping,
and employee group benefits plans. As Corporate Secretary/Treasurer,
Susan has also been responsible for keeping and maintaining Board minutes,
Board resolutions, and processing and recording stock sale transactions.
Susan is also a director of the Company. Susan received a Bachelor's
Degree in Psychology from the University of Wisconsin, Summa cum
Laude in 1976.
DIRECTORS OF THE COMPANY
Number of Directors: 5
All Company Officers/Directors have served on the Board since the
inception of the company except Dr. Sybesma who was added to the Board in
1995, and Mr. Geenen who was added in 1997.
Information concerning outside Directors (i.e. those not described
above):
Name: Steven Sorenson
Age: 46
Title: Director
Office Street Address: 620 E. Fond du Lac Avenue
Ripon, WI 54971
Telephone: (920) 748-2841
<PAGE> 20
Mr. Sorenson practices law in the Fox River Valley area as a partner in
Sorenson-Wurtz Law Offices. Mr. Sorenson concentrates his practice in the
areas of commercial, corporate, and financial law. As a member of the
State Bar Corporation and Banking Section, he has been involved in
projects that involve the revision development of Wisconsin corporate and
banking laws. Mr. Sorenson is the current President of the Wisconsin
State Bar Association.
Education (degrees, schools, and dates): Attorney Sorenson received
his Juris Doctorate from Marquette University in 1977.
Name: Dr. William Sybesma
Age: 50
Title: Director
Home Street Address: 865 Mullen Drive
Fond du Lac, WI
54935
Telephone: (920) 921-6363
Dr. Sybesma is Board Certified in the specialty of Otolaryngology
- - Head and Neck Surgery, and practices in Fond du Lac, Wisconsin at
the Fond du Lac Regional Medical Clinic. He has served as
President of the Fond du Lac County Medical Society and on the Board of
Directors of the Fond du Lac Medical Clinic. Dr. Sybesma
received his MD from the University of Iowa School of Medicine
in 1972.
Mr. Bestor and Mr. Thomas have worked previously in management
positions in startup businesses. Neither individual had signed
non-compete agreements with their former employers. Further,
all technology has been created since beginning employment with ATI,
exclusively for use by the Company, and is owned by ATI, Inc.
Both CFO and CEO have experience managing startups. From 1974-1981,
Mr. Bestor was the founder of two companies, one of which specialized in
architectural design, the other in building construction. Mr. Geenen is the
founder of a firm that specializes in small business consulting and is a
recognized expert in the area in startup companies. He was also an early
part of the senior management team at Air Wisconsin, seeing it through
many stages of its growth and expansion over the 22 years he was there.
Key man life insurance exists on Mr. Bestor for $1 million that is
owned by the Company, and or which Mrs. Susan Bestor is the
primary beneficiary.
<PAGE> 21
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following material contains information concerning the directors,
including their recent employment, positions with the Company, other
directorships and age as of the date of this Form 10-KSB.
<TABLE>
<CAPTION>
CAPACITY
NAME AGE WHICH SERVED OFFICER SINCE
- -------------------------------------------------------------------
<S> <C> <C> <C>
Lawrence Bestor 45 Chairman
460 Cedar Street CEO and President
Fond du Lac, WI
54935
William Geenen 59 Chief Operating Officer
460 Cedar Street
Fond du Lac, WI
54935
Blade Thomas 45 Vice President,
460 Cedar Street Marketing
Fond du Lac, WI
54935
Steven Sorenson 46 Director
460 Cedar Street
Fond du Lac, WI
54935
Dr. William Sybesma 50 Director
460 Cedar Street
Fond du Lac, WI
54935
</TABLE>
- ---------------------------
<PAGE> 22
Each director holds office until the next annual meeting of shareholders or
until a successor has been duly elected and qualified. There are currently
vacancies on the board of directors. The Board is seeking qualified nominees
to fill the vacancies and anticipates that the nominees will be presented
to shareholders at the Company's next annual meeting. Officers are appointed
by and serve at the discretion of the Board of Directors. All of the
Company's officers devote full-time to the Company's business and affairs.
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of
the Company's Common Stock and any subsequent changes in that ownership to the
Commission and the Company. Specific due dates for these reports have been
established and the Company is required to disclose any failure to file, or
late filing, of such reports. Based solely on the Company's review of
Forms 3, 4 and 5 and amendments thereto furnished to the Company and written
representations with respect to filing of such Forms, the Company is aware
that all Forms have been filed timely to date.
COMMITTEES OF THE BOARD
The Board of Directors will delegate certain of its authority to a
Compensation Committee and an Audit Committee. There are currently
vacancies on both of these committees. The Board expects to fill such
vacancies after it has filled the vacancies on the Board of Directors.
The primary function of the Compensation Committee will be to review
and make recommendations to the Board with respect to the compensation,
including bonuses, of the Company's officers and to administer the Company's
proposed Option Plan.
The function of the Audit Committee is to review and approve the scope of
audit procedures employed by the Company's independent auditors, to review
and approve the audit reports rendered by both the Company's independent
auditors and to approve the audit fee charged by the independent auditors.
The Audit Committee will report to the Board of Directors with respect to
such matters and recommends the selection of independent auditors.
BOARD AND COMMITTEE ATTENDANCE
In the 1997 fiscal year, the Board of Directors held four meetings. All
directors attended more than 75% of the aggregate of board and committee
meetings held during the 1997 fiscal year.
<PAGE> 23
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
________________________________________________________________________________________________________________
Annual Compensat. Awards Payouts
________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Rest. All
Name and Annual Stock LTIP Other
Principal Comp. Award(s) Opt. P/outs Comp.
Position Year Salary Bonus($) ($) ($) SARs(#) ($) ($)
________________________________________________________________________________________________________________
Larry Bestor 1997 $65,000
460 Cedar St.
Fond du Lac,
WI 54935
Susan Bestor 1997 $8,250
460 Cedar St.
Fond du Lac,
WI 54935
</TABLE>
No employee of the Company receives any additional compensation for
his services as a director. Non-management directors receive no salary for
their services as such, but are entitled to receive reasonable travel or
other out-of-pocket expenses incurred by non-management directors in attending
meetings of the Board of Directors and a fee of $100.00 per meeting attended.
The Company has no retirement, pension or profit sharing program for
the benefit of its directors, officers or other employees. The Board of
Directors may recommend one or more such programs for adoption in the future.
<PAGE> 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of June 3, 1998 by (i) each person known
by the Company to own beneficially more than 5% of the outstanding Common
Stock, (ii) each director, and (iii) all executive officers and directors as
a group. Each person has sole voting and sole investment or dispositive power
with respect to the shares shown except as noted.
Principal owners of the Company (those who beneficially own directly or
indirectly 10% or more of the common and preferred stock presently
outstanding) starting with the largest common stockholder. Include separately
all common stock issuable upon conversion of convertible securities
(identifying them by asterisk) and show average price per share as if
conversion has occurred. Indicate by footnote if the price paid was for a
consideration other than cash and the nature of any such consideration.
Shares of ATI Networks
Common Stock to be
Beneficially Owned Percent
Name and as of the 06-22-98 of
Address Record Date Class
Lawrence Bestor 1,356,640 43.00%
460 Cedar Street
Fond du Lac, WI
54935
Oshkosh Truck Corp. 600,000 18.80%
2307 Oregon St.
Oshkosh, WI
54935
William Geenen 4,000 .13%
460 Cedar Street
Fond du Lac, WI
54935
Blade Thomas 10,000 .03%
460 Cedar Street
Fond du Lac, WI
54935
<PAGE> 25
Steven Sorenson 22,000 .70%
460 Cedar Street
Fond du Lac, WI
54935
Dr. William Sybesma 80,000 2.60%
460 Cedar Street
Fond du Lac, WI
54935
All Directors and 1,472,640 46.40%
Officers as a Group
the transactions described below were fair and reasonable to the
Company on the basis that such transactions were on terms at least as
favorable as could have been obtained from unaffiliated third parties.
The transactions between officers and directors of the Company, on the
one hand, and the Company, on the other, have inherent conflicts of interest.
(a) The number of shares subject to issuance under presently
outstanding stock purchase agreements, stock options, warrants or rights:
7,213,000 shares ( 67 % of total shares to be outstanding after the
completion of the offering if all securities sold, assuming exercise of
options and conversion of convertible securities). Indicate which have been
approved by shareholders. State the expiration dates, exercise prices and
other basic terms for these securities:
Year of Expiration Exercise Price Number of Shares
2004 $0.10 6,176,000
2004 $1.00 142,000
2004 $2.50 112,000
2005 $2.50 640,000
2006 $5.00 143,000
2007 $5.00 101,000
(b) Number of common shares subject to issuance under existing stock
purchase or option plans but not yet covered by outstanding purchase
agreements, options or warrants: 697,000 shares.
<PAGE> 26
Shareholder approval is not required for grants made under the
Employee Stock Option Plan. Board approval is required for all
other increases in capitalization. The Board is currently composed of
three Company officers and three non-employee shareholder
representatives.
All employees except the President have signed two year non-compete
agreements. In addition, the Company has an employee stock option plan
that vests stock options awarded each year over a 5 year period at 20%
per year.
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following documents are filed herewith or have been included as
exhibits to previous filings with the Commission and are incorporated herein
by this reference:
EXHIBIT NO. DOCUMENT
3.1 Articles of Incorporation of the Company, as amended;
3.2 Bylaws of the Company, as amended;
23.1 Law Offices of Mark T. Thatcher, Consent of Counsel
23.2 Consent of Schneck and Associates, independent
certified public accountants for the Company.
27 Financial Data Schedule
- ---------------------------------------
(b) REPORTS ON FORM 8-K
The Company has not filed any reports on Form 8-K during the
1997 fiscal year.
<PAGE> 27
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
A majority of the Directors and the Chief Executive and Financial
Officers of the Company shall sign this Disclosure Document on behalf of the
Company and by so doing thereby certify that each has made diligent efforts
to verify the material accuracy and completeness of the information herein
contained. By signing this Disclosure Document, the Chief Executive and Chief
Financial Officers agree to make themselves, the Company's books and records,
copies of any contract, lease or other document referred to in the Disclosure
Document, or any other material contract or lease (including stock options
and employee benefit plans), except any proprietary or confidential portions
thereof, and a set of the exhibits to this Disclosure Document, available to
each investor prior to the time of investment, and to respond to questions
and otherwise confirm the information contained herein prior to the making
of any investment by such investor.
The Chief Financial Officer signing this form is hereby certifying that
the financial statements submitted fairly state the Company's financial
position and results of operations, or receipts and disbursements, as of the
dates and period(s) indicated, all in accordance with generally accepted
accounting principles consistently applied (except as stated in the notes
thereto) and (with respect to year-end figures) including all adjustments
necessary for fair presentation under the circumstances.
<PAGE> 28
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Chief Executive Officer/Director Director
/s/ Lawrence Bestor /s/ Dr. William Sybesma
Lawrence Bestor Dr. William Sybesma
Chief Financial Officer/Director General Counsel/Director
/s/ William Geenen /s/ Steven Sorenson
William Geenen Steven Sorenson
<PAGE> F-1
FINANCIAL STATEMENTS
December 31, 1997 and December 31, 1996
With Independent Auditors' Report
TABLE OF CONTENTS
ATI, INC.
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS
Balance Sheets F-(3-4)
Statements of Operations F-(5-6)
Statements of Stockholders' Equity F-7
Statements of Cash Flows F-(8-9)
Notes to Financial Statements F-(10-19)
<PAGE> F-2
Independent Auditors' Report
Board of Directors
ATI, INC.
Fond du Lac, Wisconsin
We have audited the accompanying balance sheets of ATI, INC. as of December
31, 1997 and 1996, and the related statements of operations, stockholders'
equity and cash flows for the years then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide 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 ATI, INC. as of December 31,
1997 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Schenck & Associates
________________________
Fond du Lac, Wisconsin
May 1, 1998
<PAGE> F-3
ATI NETWORKS, INC.
Balance Sheets
December 31, 1997 and December 31, 1996
ASSETS
1997 1996
_______________ _______________
Current assets
Cash and cash equivalents $ 24,938 $ 58,651
Investment securities 4,000 10,800
Accounts receivable allowance,
Net allowance of $4,015
and $126, respectively 8,113 110,994
Inventories 10,050 26,279
Prepaid expenses 1,376 683
_______________ _______________
Total current assets 48,477 207,407
Property and equipment
Office furniture and equipment 78,749 62,695
Less accumulated depreciation (36,095) (26,013)
_______________ _______________
Net property and equipment 42,654 36,682
Other Assets
Capitalized software
development cost, net of
accumulated amortization
of 278,677 and 158,934,
respectively 426,610 271,713
$ 517,741 515,802
The accompanying notes are an integral part of these financial statements.
<PAGE> F-4
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
_______________ _______________
Current liabilities
Note payable $ 50,000 $ -
Current maturities of
long-term debt 2,524 -
Accounts payable 14,840 19,639
Accrued liabilities 5,602 14,338
Deferred revenue 52,416 52,414
Total current liabilities 125,382 86,391
Long-term debt, less current maturities 5,477 -
Deferred revenue 52,416 104,829
Total liabilities 183,275 191,220
Stockholders equity
Common stock, no par value,
10,000,000 shares authorized,
2,560,500* shares issued and
outstanding 1,126,391 940,281
Accumulated deficit (775,125) (595,299)
Unrealized loss on investments (16,800) (20,400)
Total stockholders' equity 334,466 324,582
$ 517,741 $ 515,802
*Adjusted for two-for-one stock
split effective May 1, 1996.
See notes to financial statements.
<PAGE> F-5
ATI, INC.
Statements of Operations Years Ended
December 31, 1997 and 1996
Percent of Net Sales
1997 1996 1997 1996
Net sales
Software $ 72,790 $ 44,719 87.14 3.8
Other 10,735 57,330 12.95 6.2
Total net sales 83,525 102,049 100.0 100.0
Operating expenses
Cost of sales 24,623 35,145 29.5 34.4
Amortization of
capitalized software
development costs 119,743 91,204 143.4 89.4
Research and
development expenses 8,093 9.7
Sales and marketing
expenses 57,918 83,709 69.3 82.0
General and
Administrative expenses 36,281 16,821 43.4 16.5
Depreciation expense 10,882 7,858 13.07 .7
Total operating expenses 232,917 199,592 278.81 95.6
Loss from operations (174,015) (132,688) (208.3) (130.0)
Other income (expense)
Loss on sale of
investment securities (6,545) (2,597) (7.8) (2.5)
Dividend and interest
income 1,063 5,726 1.3 5.6
Miscellaneous income 702 7.1
Interest expense (399) (95) (.5) (.1)
Other income (expense), net (5,811) 3,061 (6.9) 3.0
Loss before income taxes (179,826) (129,627) (215.3) (127.0)
Provision for income taxes----
Net loss $(179,826) $(129,627) (215.3) (127.0)
<PAGE> F-6
ATI, INC.
Statements of Operations, continued
Years Ended December 31, 1997 and 1996
Percent of Net Sales
1997 1996 1997 1996
Net loss $(179,826) $(129,627) (215.3) (127.0)
Net loss per share $ (0.07) $ (0.05)
Weighted-average number of
common shares outstanding 2,592,840 2,560,500
See notes to financial statements.
<PAGE> F-7
<TABLE>
ATI, INC.
Statements of Stockholders' Equity
Years Ended December 31, 1997 and 1996
<CAPTION>
<S> <C> <C> <C> <C> <C>
Unrealized
Common Stock Accumulated Loss on
Shares Amount Deficit Investments Total
Balance,
January 1, 1996 1,280,250 $940,281 $(465,672) $ (5,999) $ 468,610
Two-for-one
stock split 1,280,250 - - - -
Repurchase of
common stock - - - - -
Unrealized loss
On investments - - - (14,401) (14,401)
Net loss - - (129,627) - (129,627)
Balance,
December 31, 1996 2,560,500 940,281 (595,299) (20,400) 324,582
Issuance of
common stock 37,340 191,110 - - 191,110
Repurchase of
common stock (5,000) (5,000) (5,000)
Unrealized loss
on investments - - - 3,600 3,600
Net loss - - (179,826) - (179,826)
Balance,
December 31, 1997 2,592,840 1,126,391 (775,125) (16,800) 334,466
</TABLE>
See notes to financial statements
<PAGE> F-8
ATI, Inc.
Statements of Cash Flows
Years Ended
December 31, 1997 and 1996
1997 1996
______________ ______________
Operating activities
Net loss $ (179,826) $ (129,627)
Adjustments to reconcile
net loss to net cash
provided by (used for)
operating activities:
Depreciation and amortization 130,625 99,060
Loss on sale of property and
equipment - -
Loss on sale of
investment securities 6,545 2,597
Provision for losses on
accounts receivable 3,889 -
Deferred revenue (52,411) 157,243
Decrease (increase) in:
Accounts receivable 98,992 (100,389)
Inventories 16,229 (3,207)
Prepaid expenses (693) 224
Other - 91
Increase (decrease) in:
Accounts payable (4,799) 19,639
Accrued liabilities (8,736) (29)
Net cash provided by (used for)
operating activities 9,815 45,602
Investing activities
Purchase of property and equipment (16,854) (18,863)
Purchase of investment securities
available for sale - (12,563)
Proceeds from sale of
investment securities
available for sale 3,855 17,766
Capitalized software
development costs (274,640) (244,140)
Net cash used for investing activities (287,639) (257,800)
Financing activities
Proceeds from issuance of
note payable and
long-term debt 58,001 -
Retirement of note payable and
long-term debt - -
Proceeds from sale of common stock 191,110 -
Purchase of common stock (5,000) -
Net cash provided by
financing activities 244,111
<PAGE> F-9
ATI, INC.
Statements of Cash Flows, continued
Years Ended December 31, 1997 and 1996
1997 1996
______________ _____________
Cash and cash equivalents
Net increase (decrease) (33,713) (212,198)
Beginning of year 58,651 270,849
End of year $ 24,938 $ 58,651
Supplemental cash flow information
Cash paid for interest $ 399 $ 95
See notes to financial statements.
<PAGE> F-10
ATI NETWORKS, INC.
Notes to Financial Statements
ATI, INC.
Notes to Financial Statements
December 31, 1997 and 1996
Note 1 - Nature of business and summary of significant accounting policies
A. Nature of business
ATI, Inc., doing business as American Technologies, Inc. ("the Company")
is a U.S.-based company whose principal line of business is to develop,
market, and license unique software applications that can be used for business
advertising, automated vehicle tracking, wireless communications, and
entertainment. The principal market for the Company's products and
technologies are companies seeking to advertise their products and services on
these software platforms. Additional markets include companies with mobile
assets, organizations requiring the wireless transfer of data and the general
public. The Company grants unsecured credit to its United States customers.
B. 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.
Significant estimates are used in assessing the carrying value of capitalized
software development costs. It is reasonably possible that these estimates
could change in the near term.
C. Cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with maturities of three months or less to be
cash equivalents.
D. Inventories
Inventories, consisting of computer software and hardware, are stated at the
lower of cost, determined on the first-in, first-out method, or market.
<PAGE> F-11
ATI, INC.
Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 1 - Nature of business and summary of significant accounting policies,
continued
E. Software development costs
The Company capitalizes internal costs in developing software products
upon determination that technological feasibility has been established for the
product. Costs incurred prior to the establishment of technological feasibility
are charged to product development expense. When the product is available
for general release to customers, capitalization ceases and such costs are
amortized on a product-by-product basis based on current and future revenue
with an annual minimum equal to the straight-line amortization over the
remaining estimated economic useful life of the product (three years).
Capitalized software development costs at December 31, 1997 and 1996 were
approximately $427,000 and $272,000, respectively. Amortization of these costs
amounted to approximately $120,000 and $91,000 for 1997 and 1996,
respectively.
F. Property, equipment and depreciation
Property and equipment are stated at cost. Expenditures for additions
and improvements are capitalized while replacements, maintenance and repairs
which do not improve or extend the lives of the respective assets are expensed
currently as incurred. Properties sold, or otherwise disposed of are removed
from the property accounts, with gains or losses on disposal credited or
charged to the results of operations.
Depreciation is provided over the estimated useful lives of the
respective assets, using the straight-line method for financial reporting
purposes and, in general, accelerated methods for income tax purposes.
G. 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 which represent the future tax consequences of differences
between the financial and tax bases of assets and liabilities. The
differences relate primarily to depreciable assets and software development
costs. 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 also are recognized for operating losses and tax credits that are
available to offset future taxable income.
<PAGE> F-12
ATI, INC.
Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 1 - Nature of business and summary of significant accounting
policies, continued
H. Net loss per share
Net loss per share is determined using the weighted average number of common
shares outstanding during the period, adjusted for the dilutive effect of
outstanding options. In periods in which a net loss has been incurred, all
common stock equivalents are considered antidilutive. Only primary loss per
share information is provided since fully diluted per share amounts are not
applicable for loss periods.
Note 2 - Investment securities
Management determines the appropriate classification of securities at the time
of purchase. If management has the intent and the Company has the ability at
the time of purchase to hold debt securities until maturity, they are
classified as held to maturity investments and carried at amortized historical
cost. Debt securities not intended to be held to maturity and marketable
equity securities are classified as available for sale and carried at fair
value.
Realized gains and losses on dispositions are based on the net proceeds and
the adjusted book value of the securities sold, using the specific
identification method. Unrealized gains and losses on marketable securities
available for sale are based on the difference between book value and fair
value of each security. These unrealized gains and losses are credited or
charged to stockholders' equity, whereas realized gains and losses flow
through the Company's statement of operations.
At December 31, 1997 and 1996, the marketable securities portfolio was
comprised of equity securities classified as available for sale.
Following are the market values and original cost of marketable securities
available for sale as of December 31:
<TABLE>
<CAPTION>
1997 1996
Market Unrealized Market Unrealized
Value Cost Losses Value Cost Losses
<C> <C> <C> <C> <C> <C>
Equity
securities $ 4,000 $ 20,800 $ 16,800 $ 10,800 $ 31,200 $ 20,400
<PAGE> F-13
ATI, INC.
Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 3-Notes payable
The Company has a $50,000 line-of-credit with Bank One of Fond du Lac,
which is payable May, 1998. Interest is payable monthly at prime plus
1/2% (9% at December 31, 1997). The line-of-credit is collateralized by a
general business security agreement and personal guarantee of the majority
shareholder. Outstanding borrowings under this line-of-credit amounted to
$50,000 and $0 at December 31, 1997 and 1996, respectively.
Note 4-Long-term debt
Long term debt at December 31, 1997 and 1996 consists of the following:
1997 1996
Capital leases (Note 5). $ 8,001 $ -
Less current maturities 2,524 -
Long-term debt, less current maturities $ 5,477 $ -
Aggregate maturities of long-term debt for each of the years succeeding
December 31, 1997 are as follows:
Year ending
December 31,
1998 $ 2,524
1999 3,070
2000 2,407
$ 8,001
<PAGE> F-14
ATI, INC.
Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 5-Capital leases
The Company has leased computer equipment under a lease which is the equivalent
of a purchase agreement. The cost of $15,864 is included as an element of
office furniture and equipment in the balance sheet at December 31, 1997.
Accumulated depreciation relating to the compute equipment at December 31,
1997 was $1,586.
Depreciation expense relating to the computer equipment was $1,586 for 1997.
Following is a schedule by years of future minimum lease payments under the
capital leases together with the present value of the net minimum payments as
of December 31, 1997:
Year ending
December 31,
1998 $ 3,883
1999 3,883
2000 2,589
Total minimum lease payments 10,355
Less amount representing interest 2,354
Present value of net minimum
lease payments $8,001
Note 6-Operating leases
The Company leases its office facilities under a month-to-month operating lease.
Rent expense under all operating leases amounted to $7,200 for both 1997 and
1996.
Note 7-Income taxes
The provision for income taxes for the years ended December 31 1997 and 1996
consists of the following:
December 31,
1997 1996
Current $- $-
Deferred - -
Income tax expense $- $-
<PAGE> F-15
ATI, INC.
Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 7-Income taxes, continued
The effective income tax rate on loss before income taxes differed from the
federal income tax statutory rate for the following reasons for the years
ended December 31, 1997 and 1996:
December 31,
1997 1996
Income tax charge (credit):
At statutory rate $ (53,000) $ (34,000)
Change in valuation allowance 62,000 40,000
State income taxes (credit),
net of federal tax effect (9,000) (6,000)
Provision for income taxes $ - $ -
Significant components of the Company's
net deferred tax asset as of
December 31, 1997 and 1996
were as follows:
December 31,
1997 1996
Deferred tax assets:
Accrued liabilities not yet
deductible for tax $ 30,000 $ 500
Federal and state loss
carryforwards 291,000 130,000
Capitalized software
development costs - 7,500
Deferred asset 321,000 138,000
Valuation allowance (204,000) (135,000)
Deferred tax liabilities:
Depreciation - (3,000)
Capitalized software
development costs (117,000)
Net deferred tax asset $ - $ -
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $1,053,000 and $1,046,000, respectively, for federal and State
income tax purposes, which expire from 2005 through 2012.
<PAGE> F-16
ATI, INC.
Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 8-Related party transactions
During 1996, the Company entered into an agreement with Sybesma Research
("Sybesma"), a company owned by a stockholder owning less than 10% of the
Company's common stock. Under the agreement, Sybesma agreed to pay for
certain software development costs and overhead in connection with new
development of the Logitrak and NavQuest products. In exchange, the Company
agreed to pay Sybesma a royalty equal to 15% of the gross profit on all future
sales of Logitrak and NavQuest. The royalties are payable either in cash or
stock options for common stock of the Company at the discretion of Sybesma.
The Company billed Sybesma approximately $157,000 during 1996 and no
additional billing is expected under the agreement. The Sybesma billings in
1996 have been recorded as deferred revenue and will be recognized as income
over the same time period that the related software development costs are
amortized to expense. (See Note 1.F.) Accounts receivable at December 31,
1996 includes $76,000 due from Sybesma under this agreement.
Note 9 - Stock split
On April 24, 1996, the Board of Directors authorized a 2-for-1 stock
split to stockholders of record on May 1, 1996. The stock split resulted in the
issuance of 1,280,250 shares of common stock and 3,585,000 shares of stock
options and warrants.
Note 10 - Employee incentive compensation plan
The Company has an incentive plan for the purpose of providing incentive
compensation to officers and employees ("Plan"). The Plan provides that 25% of
net income as defined in the Plan shall be placed in the Employee Incentive
Fund, to be distributed to employees in amounts to be determined, at the sole
discretion of the Employee Incentive Compensation Committee.
Participants in the Plan include all officers upon their initial hire date and
all salaried employees upon their completion of 12 months employment with the
Company.
The Board of Directors reserves the right to amend, modify, suspend, or
discontinue the Plan at any time.
There were no Company payments made under the Plan during 1997 and 1996.
<PAGE> F-17
ATI, INC.
Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 11-Stock option plan
The Company has a Stock Purchase and Option Plan ("Plan") under which it
has granted stock options and warrants to purchase common stock to employees,
directors, officers, and others at various times since 1994. Options and
warrants are granted at an option price per share equal to or greater than
fair value at the date of grant, as determined by the best judgment of the
Board of Directors. Generally, options granted to employees vest over a
five-year period and expire 10 years after the date of grant. Canceled options
are available for future grant.
The following is a summary of stock option plan activity for the years ended
December 31, 1997 and 1996:
1997 1996
Shares
Granted 101,000 123,000
Exercised - -
Canceled - (90,000)
December 31:
Outstanding 7,109,000 7,008,000
Exercisable 8,878,800 6,860,400
Average exercise price per share
Granted $ 5.00 $5.00
Exercised - -
Canceled - $ 1.00
December 31:
Outstanding .45 .45
Exercisable .35 .33
Stock options outstanding at December 31, 1996 had a range of exercise prices
of $.10 to $5.00 and an average remaining contractual life of eight years.
Options outstanding with an exercise price of less than $1.00 totaled 6,176,000,
all of which were exercisable. The remaining 933,000 options outstanding had a
price of $1.00 or greater of which 702,800 were exercisable as of December 31,
1997. The weighted average remaining contractual life for each of these groups
of options was seven years and eight years, respectively.
<PAGE> F-18
ATI, INC.
Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 11 - Stock option plan, continued
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.123, a new standard of accounting and
reporting for stock-based compensation plans. The Company has adopted the new
standard in 1996. The Company has continued to measure compensation cost for
its stock option plan using the intrinsic value method of accounting it has
historically used and, therefore, the new standard has no effect on the
Company's operating results.
Had the Company used the fair value method of accounting for its stock option
plan beginning in 1995 and charged compensation costs against income over the
vesting period, net loss and net loss per share for 1997 and 1996 would have
been increased to the following pro forma amounts:
1997 1996
Net loss:
As reported $ (179,826) $ (129,627)
Pro forma (308,031) (212,305)
Net loss per share:
As reported (.07) (.05)
Pro forma (.12) (.08)
The pro forma information above only includes stock options granted in 1996
and 1997. Compensation expense under the fair value method of accounting will
increase over the next few years as additional stock option grants are
considered. The weighted-average grant-date fair value of options granted
during 1997 and 1996 was $2.25 and $2.27, respectively. The weighted-average
grant-date fair value of options was determined by using the fair value of
each option grant on the date of grant, utilizing the Black-Scholes
option-pricing model and the following key assumptions:
1997 1996
Risk-free interest rates 5.73% 5.90%
Expected life 7 years 7 years
Expected volatility 30% 30%
Expected dividends None None
<PAGE> F-19
ATI, INC.
Notes to Notes to Financial Statements, Continued
December 31, 1997 and 1996
Note 12- Year 2000 issue
The Company has designed, developed and tested its software products to be
Year 2000 compliant. However, it is possible that the current products may
contain undetected errors or defects associated with Year 2000 functions.
Year 2000 compliance issues are expected to result in a significant amount of
litigation against software vendors and the extent to which the Company may
be affected is uncertain.
The Company has been informed by substantially all of its business application
software suppliers that their software is Year 2000 compliant or will be by
the end of 1998. The software from these suppliers is used in the Company's
financial, sales, customer support and administrative operations. Accordingly,
the Company expects that the advent of the millennium will have no adverse
effect on its business, operating results and financial condition. However,
there can be no assurances that Year 2000 problems will not occur with respect
to the Company's computer systems. The Year 2000 problem may affect other
entities with which the Company transacts business and the Company cannot
predict the effect of the Year 2000 problem on such entities.
</TABLE>
RESTATED ARTICLES OF INCORPORATION WITH AMENDMENTS
OF
ATI NETWORKS, INC.
(AMENDED AND RESTATED AS OF JUNE 10, 1998)
KNOW ALL MEN BY THESE PRESENTS:
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following amended and restated Articles of
Incorporation. These articles correctly set forth the provisions of the
Articles of Incorporation, as amended, and supersede the original Articles of
Incorporation and all amendments thereto.
ARTICLE I
NAME
The new name of the corporation is ATINETWORKS, INC.
The principal office and address is 460 Cedar Street, Fond du Lac, WI
54935
ARTICLE II
PERIOD OF DURATION
This corporation shall exist perpetually unless dissolved according to
law.
ARTICLE III
PURPOSE
The Company was founded to develop and license leading edge software
applications. The Company has developed pioneering, proprietary software
technologies for vehicle navigation, remote tracking of a wireless device, and
real-time, data communications over the Internet. Recently the Company created
and launched two fully automated exchange websites for doing electronic
commerce over the Internet.
<PAGE>
ARTICLE IV
POWERS
In furtherance of the foregoing purposes the corporation shall have and
may exercise all of the rights, powers and privileges now or hereafter
conferred upon corporations organized under the Colorado Business Corporation
Act, as amended, or by law. In addition, it may do everything necessary,
suitable or proper for the accomplishment of any corporate purpose.
ARTICLE V
CAPITAL
The total number of shares of the capital stock which the Corporation has
authority to issue is forty million (40,000,000) shares, divided into twenty
million (20,000,000) shares of common stock with no par value per share (the
"Common Stock"), and twenty million (20,000,000) shares of Series A
Convertible Preferred Stock with a par value of $100 per share (hereinafter
sometimes referred to as the "Series A Convertible Preferred Stock" or the
"Preferred Stock").
The aggregate number of common shares which this corporation shall have
the authority to issue is twenty million (20,000,000), each without par value
which shares shall be designated common stock. No share shall be issued
without consideration being exchanged, and it shall thereafter be
non-assessable. The Board of Directors may determine by a majority vote if
gifts of shares will be allowed under certain circumstances.
Shares of the corporation not having a par value shall be issued for such
consideration expressed in dollars as may be fixed from time to time by the
vote of the director(s).
The following is a description of each class of stock of the Corporation
with the preferences, conversion and other rights, restrictions, voting
powers, limitations as to distributions, qualifications, and terms and
conditions of redemption of each class:
FIRST: In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, the holders of any Preferred
Stock then outstanding shall be paid out of the assets of the Corporation
available for distribution to its stockholders an amount equal to One Dollar
($1.00) per share plus an amount equal to all unpaid declared distributions
thereon, without interest, and no more, before any amount shall be paid or any
assets of the Corporation shall be distributed among the holders of the Common
Stock and, if the assets of the Corporation available for distribution to its
stockholders shall be insufficient to permit the payment in full to the
holders of the Preferred Stock, as aforesaid, then the entire assets of the
Corporation available for distribution to its stockholders shall be
distributed ratably among the holders of the Preferred Stock; then and
thereafter, the remaining assets of the Corporation available for distribution
to its stockholders shall be distributed among and paid to the holders of the
Preferred Stock and the Common Stock, share and share alike and without any
distinction as to class, in proportion to their respective stockholdings.
<PAGE>
A merger of the Corporation with or into any other corporation, a share
exchange involving the Corporation, or a sale, lease, exchange, or transfer of
all or any part of the assets of the Corporation which shall not in fact
result in the liquidation of the Corporation and the distribution of its
assets to its stockholders shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation within
the meaning of this Article SIXTH, paragraph 1.
SECOND: Except as herein above provided in paragraph 1 of this Article
SIXTH, the Preferred Stock and the Common Stock of the Corporation shall be
identical in all respects and for all purposes and the holders of the
Preferred Stock and the holders of the Common Stock voting together and
without distinction as to class shall be entitled to one vote per share in all
proceedings in which actions shall be taken by the stockholders of the
Corporation.
THIRD: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
(1) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized.
(2) The Board of Directors of the Corporation may classify or reclassify
any unissued stock by setting or changing in any one or more respects, from
time to time before issuance of such stock, the preferences, conversion or
other rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms or conditions of redemption of such stock.
(3) The Board of Directors shall have power, if authorized by the Bylaws,
to designate by resolution or resolutions adopted by a majority of the whole
Board of Directors, one or more committees, each committee to consist of two
or more of the directors of the Corporation, which, to the extent provided in
said resolutions or in the Bylaws of the Corporation and permitted by the
Colorado Business Corporation Act, shall have and may exercise any or all of
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of the
Corporation to be affixed to all instruments and documents which may require
it.
(4) If the Bylaws so provide, the Board of Directors of the Corporation
shall have power to hold its meetings, to have an office or offices and,
subject to the provisions of the Colorado Business Corporation Act, to keep
the books of the Corporation, outside of said State at such place or places as
may from time to time be designated by it.
<PAGE>
(5) The Board of Directors shall have power to borrow or raise money, from
time to time and without limit, and upon any terms, for any corporate
purposes; and, subject to the Colorado Business Corporation Act, to authorize
the creation, issue, assumption or guaranty of bonds, notes or other evidences
of indebtedness for moneys so borrowed, to include therein such provisions as
to redeemability, convertibility or otherwise, as the Board of Directors, in
its sole discretion, may determine and to secure the payment of principal,
interest or sinking fund in respect thereof by mortgage upon, or the pledge
of, or the conveyance or assignment in trust of, the whole or any part of the
properties, assets and goodwill of the Corporation then owned or thereafter
acquired.
The enumeration and definition of a particular power of the Board of Directors
included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other article of these Articles of Incorporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the laws of the State of Colorado now or
hereafter in force.
FOURTH: Notwithstanding any provision of law to the contrary, the
affirmative vote of a majority of all the votes entitled to be cast on the
matter shall be sufficient, valid and effective, after due authorization,
approval or advice of such action by the Board of Directors, as required by
law, to approve and authorize the following acts of the Corporation:
(i) the amendment of these Articles of Incorporation;
(ii) the merger of the Corporation into another corporation or the merger
of one or more other corporations into the Corporation;
(iii) the sale, lease, exchange or other transfer of all, or
substantially all, of the property and assets of the Corporation, including
its goodwill and franchises;
(iv) the participation by the Corporation in a share exchange (as defined
in the Colorado Business Corporation Act) as the corporation the stock of
which is to be acquired; and
(v) the voluntary or involuntary liquidation, dissolution or winding-up
of or the revocation of any such proceedings relating to the Corporation.
ARTICLE VI
AUTHORIZATION OF SERIES A CONVERTIBLE PREFERRED STOCK
The total number of shares of the capital stock which the Corporation has
authority to issue is forty million (40,000,000) shares, divided into twenty
million (20,000,000) shares of common stock with no par value per share (the
"Common Stock"), and twenty million (20,000,000) shares of Series A
Convertible Preferred Stock with a par value of $100 per share (hereinafter
sometimes referred to as the "Series A Convertible Preferred Stock" or the
"Preferred Stock").
<PAGE>
A description of the "Series A Convertible Preferred Stock", including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications, and terms and conditions for
redemption, all as set by the Board of Directors of the Corporation, is as
follows:
1. Designation and Initial Number. The class of shares of Preferred Stock
hereby classified shall be designated the "Series A Convertible Preferred
Stock." The initial number of authorized shares of the Preferred Stock shall
be twenty million (20,000,000).
2. Distributions. Commencing on January 1, 1999, the holders of the
Preferred Stock shall be entitled to receive, out of funds at the time legally
available for payment of distributions in the State of Colorado, a
non-cumulative distribution at the rate of $1.00 per share per annum, payable
semi-annually in equal installments on the first days of January and July in
each year, if, as and when determined by the Board of Directors, before any
distribution shall be set apart or paid on any other capital stock for such
year.
3. Redemption. The Corporation, at the option of the Board of Directors,
may redeem the whole or any part of the Preferred Stock at any time
outstanding, at any time or from time to time after January 1, 1999, provided
that the Corporation, at any such time, shall have consummated a sale of its
securities pursuant to an effective registration statement (a "Public
Offering") filed with the Securities and Exchange Commission (the "SEC"), upon
at least 30 days' prior written notice to the holders of record of the
Preferred Stock to be redeemed, by paying a redemption price per share equal
to 150% of the par value thereof, plus all accrued and unpaid distributions
declared thereon, at the date fixed for redemption, without interest, in cash,
for each share of Preferred Stock so redeemed. The Board of Directors shall
have full power and authority, subject to the limitations and provisions
herein contained, to prescribe the manner in which and the terms and
conditions upon which the Preferred Stock shall be redeemed at any time and
from time to time. The notice of redemption to each stockholder whose shares
of Preferred Stock are to be redeemed shall specify the number of shares of
Preferred Stock of such stockholder to be redeemed, the date fixed for
redemption and the redemption price at which the shares of Preferred Stock are
to be redeemed, and shall specify where payment of the redemption price is to
be made upon surrender of such shares, shall state the conversion rate then in
effect, and that conversion rights of such shares shall terminate at the
closing of business on the date fixed for redemption. None of the Preferred
Stock acquired by the Corporation by redemption or otherwise shall be reissued
or disposed of but shall, from time to time, be retired in the manner provided
by law.
4. Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, the holders of the issued and outstanding Preferred Stock shall
be entitled to receive for each share of Preferred Stock, before any
distribution of the assets of the Corporation shall be made to the holders of
any other capital stock, a dollar amount equal to the par value thereof plus
all accrued and unpaid distributions declared thereon, without interest. After
such payment shall have been made in full to the holders of the issued and
outstanding Preferred Stock, or funds necessary for such payment shall have
<PAGE>
been set aside in trust for the account of the holders of the issued and
outstanding Preferred Stock so as to be and continue to be available therefor,
then, before any further distribution of the assets of the Corporation shall
be made, a dollar amount equal to that already distributed to the holders of
the Preferred Stock shall be distributed pro-rata to the holders of the other
issued and outstanding capital stock of the Corporation, subject to the rights
of any other class of capital stock set forth in the Articles of Incorporation
of the Corporation or Amendments to the Articles of Incorporation to State
Terms of Series Shares filed by the Corporation. After such payment shall have
been made in full to the holders of such other issued and outstanding capital
stock, or funds necessary for such payment shall have been set aside in trust
for the account of the holders of such other issued and outstanding capital
stock so as to be and continue to be available therefor, the holders of the
issued and outstanding Preferred Stock shall be entitled to participate with
the holders of all other classes of issued and outstanding capital stock in
the final distribution of the remaining assets of the Corporation, and,
subject to any rights of any other class of capital stock set forth in the
Articles of Incorporation of the Corporation or any Amendments to the Articles
of Incorporation to State Terms of Series Shares filed by the Corporation, the
remaining assets of the Corporation shall be divided and distributed ratably
among the holders of both the Preferred Stock and the other capital stock then
issued and outstanding according to the proportion by which their respective
record ownership of shares of the Preferred Stock and such capital stock bears
to the total number of shares of the Preferred Stock and such capital stock
then issued and outstanding. If, upon such liquidation, dissolution, or
winding up, the assets of the Corporation distributable, as aforesaid, among
the holders of the Preferred Stock shall be insufficient to permit the payment
to them of said amount, the entire assets shall be distributed ratably among
the holders of the Preferred Stock. A consolidation or merger of the
Corporation, a share exchange, a sale, lease, exchange or transfer of all or
substantially all of its assets as an entirety, or any purchase or redemption
of stock of the corporation of any class, shall not be regarded as a
"liquidation, dissolution, or winding up of the affairs of the Corporation"
within the meaning of this paragraph 4.
5. Conversion Privilege. Preferred Stock shall be convertible into Common
Stock as hereinafter provided and, when so converted, shall be canceled and
retired and shall not be reissued as such:
(A) Any holder of the Preferred Stock may at any time or from time
to time convert such stock into the Common Stock of the Corporation, on
presentation and surrender to the Corporation, of the certificates of the
Preferred Stock to be so converted.
(B) Each holder of Preferred Stock shall have the right to convert
such Preferred Stock on and subject to the following terms and conditions:
(i) The Preferred Stock shall be converted into Common Stock at
the conversion rate, determined as hereinafter provided, in effect at the time
of conversion. Unless such conversion rate shall be adjusted as hereinafter
provided, the conversion rate shall be one share of Common Stock for each
share of Preferred Stock so converted.
<PAGE>
(ii) In order to convert Preferred Stock into Common Stock, the
holder thereof shall on any business day surrender at the executive offices of
the Company at 460 Cedar Street, Fond du Lac, Wisconsin 54935 the certificate
or certificates representing such shares, duly endorsed to the Corporation or
in blank, and give written notice to the Corporation at said office of the
number of said shares which such holder elects to convert. Preferred Stock shall
be deemed to have been converted immediately prior to the close of business on
the day of such surrender for conversion, and the person or persons entitled
to receive the Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the date of any conversion, the
Corporation shall issue and deliver a certificate or certificates representing
the number of shares of Common Stock issuable upon such conversion, together
with cash in lieu of any fraction of a share, as provided in subparagraph (H)
of this paragraph 5, to the person or persons entitled to receive same. In
case of the conversion of only a part of the shares of any holder of Preferred
Stock, the Corporation shall also issue and deliver to such holder a new
certificate of Preferred Stock representing the number of shares of such
Preferred Stock not converted by such holder.
(C) The conversion rate as hereinabove provided shall be subject to
adjustment as follows:
(i) In case the Corporation shall (a) pay a distribution in
shares of its capital stock, (b) subdivide its outstanding shares of Common
Stock into a greater number of shares, (c) combine its outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by reclassification
of its shares of Common Stock any shares of its capital stock, the conversion
rate in effect immediately prior thereto shall be adjusted so that the holder
of a share of Preferred Stock surrendered for conversion after the record date
fixing stockholders to be affected by such event shall be entitled to receive,
upon conversion, the number of shares of Common Stock which such holder would
have owned or have been entitled to receive after the happening of such event
had such share of Preferred Stock been converted immediately prior to the
record date in the case of such dividend or the effective date in the case of
any such subdivision, combination or reclassification. An adjustment made
pursuant to this subparagraph 5(C)(i) shall be made whenever any of such
events shall happen, but shall become effective retroactively after such
record date or such effective date, as the case may be, as to shares of
Preferred Stock converted between such record date or effective date and the
date of happening of any such event.
(ii) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share, which, when added to the amount
of consideration received or receivable by the Corporation for such right or
warrant, is less than the current market price (as hereinafter defined) per
share of Common Stock at the record date mentioned below, the conversion rate
shall be adjusted so that thereafter, until further adjusted, each share of
Preferred Stock shall be convertible into that number of shares of Common
Stock determined by multiplying the number of shares of Common Stock into
which such share of Preferred Stock was theretofore convertible by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock issuable upon the exercise of such rights
or warrants, and the denominator of which shall be the
<PAGE>
number of shares of Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of shares which an amount equal to the sum
of (a) the aggregate exercise price of the total number of shares of Common
Stock issuable upon the exercise of such rights or warrants, plus (b) the
aggregate amount of consideration, if any, received, or receivable by the
Corporation for any such rights or warrants, would purchase at such current
market price. Such adjustment shall be made whenever such rights or warrants
are issued, but shall also be effective retroactively as to shares of
Preferred Stock converted between the record date for the determination of
stockholders entitled to receive such rights or warrants and the date such
rights or warrants are exercised.
(iii) In case the Corporation shall distribute to all holders
of its Common Stock any one or more of the following: (a) evidence of its
indebtedness, (b) assets (excluding cash distributions, distributions made out
of current or retained earnings and distributions of the stock of any
subsidiary), or (c) rights or warrants to subscribe for or purchase securities
issued by, or property of, the Corporation (excluding those referred to in
subparagraph 5(C)(ii) above), then in each such case the conversion rate shall
be adjusted as provided below so that thereafter, until further adjusted, the
number of shares of Common Stock into which each share of Preferred Stock
shall be convertible shall be determined by multiplying the number of shares
of Common Stock into which such share of Preferred Stock was theretofore
convertible by a fraction, the numerator of which shall be the current market
price per share of Common Stock on the date of such distribution, and the
denominator of which shall be such current market price per share of the
Common Stock, less the then fair market value (as determined by the Board of
Directors of the Corporation, whose determination shall be conclusive) of the
portion of the assets or evidence of indebtedness so distributed or of such
rights or warrants applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made, but shall
also be effective retroactively as to shares of Preferred Stock converted
between the record date for the determination of stockholders entitled to
receive such distribution and the date such distribution is made.
(iv) For the purpose of any computation under subparagraphs
5(C)(ii) and (iii) above, the current market price per share of Common Stock
at any date shall be (a) if the Common Stock is listed on any national
securities exchange, the average of the daily closing prices for the 15
consecutive business days commencing 20 business days before the day in
question (the "Trading Period"); (b) if the Common Stock is not listed on any
national securities exchange but is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the average of
the high and low bids as reported on NASDAQ for the Trading Period; and (c) if
the Common Stock is neither listed on any national securities exchange nor
quoted on NASDAQ, the higher of (x) the conversion price then in effect, or
(y) the tangible book value per share as of the end of the Corporation's
immediately preceding fiscal year.
<PAGE>
(v) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such rate; provided, however, that any adjustments which by reason of this
subparagraph 5(C)(v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
subparagraph 5(C) shall be made to the nearest one-hundredth of a share. (D)
No adjustment of the conversion rate shall be made in any of the following
cases:
(i) upon the grant or exercise of stock options hereafter
granted, or under any employee stock option plan now or hereafter authorized,
to the extent that the aggregate of the number of shares which may be
purchased under such options and the number of shares issued under such
employee stock purchase plan is less than or equal to ten percent (10%) of the
number of shares of Common Stock outstanding on January 1 of the year of the
grant or exercise;
(ii) shares of Common Stock issued upon the conversion of
Preferred Stock;
(iii) shares issued in connection with the acquisition by the
Corporation or by any subsidiary of the Corporation of 80% or more of the
assets of another corporation, and shares issued in connection with the
acquisition by the Corporation or by any subsidiary of the Corporation of 80%
or more of the voting shares of another corporation (including shares issued
in connection with such acquisition of voting shares of such other corporation
subsequent to the acquisition of an aggregate of 80% of such voting shares),
shares issued in a merger of the Corporation or a subsidiary of the
Corporation with another corporation in which the Corporation or the
Corporation's subsidiary is the surviving corporation, and shares issued upon
the conversion of other securities issued in connection with any such
acquisition or in any such merger;
(iv) shares issued by way of dividend or other distribution on
Common Stock excluded from the calculation of the adjustment under this
subparagraph 5(D) or on Common Stock resulting from any subdivision or
combination of Common Stock so excluded; or
(v) shares issued pursuant to all stock options and warrants
outstanding on the date of the filing of these Articles.
(E) Whenever the conversion rate is adjusted as herein provided, the
Corporation shall prepare a certificate signed by the Treasurer of the
Corporation setting forth the adjusted conversion rate and showing in
reasonable detail the facts upon which such adjustment is based. As promptly
as practicable, the Corporation shall cause a copy of the certificate referred
to in this subparagraph 5(E) to be mailed to each holder of record of issued
and outstanding Preferred Stock at the address of such holder appearing on the
Corporation's books.
(F) The Corporation shall pay all taxes that may be payable in
respect of the issue or delivery of Common Stock on conversion of Preferred
Stock pursuant hereto, but shall not pay any tax which may be payable with
respect to income or gains of the holder of any Preferred Stock or Common
Stock or any tax which may be payable in respect of any transfer involved in
<PAGE>
the issue and delivery of the Common Stock in a name other than that in which
the Preferred Stock so converted was registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to
the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(G) Upon conversion of any shares of Preferred Stock, the holders of
the shares of Preferred Stock so converted shall not be entitled to receive
any distributions declared with respect to such shares of Preferred Stock
unless such distributions shall have been declared by the Board of Directors
and the record date for such distributions shall have been on or before the
date such shares shall have been converted. No payment or adjustment shall be
made on account of distributions declared and payable to holders of Common
Stock of record on a date prior to the date of conversion.
(H) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Preferred Stock. If more
than one share of Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of such shares
so surrendered. If the conversion of any share of Preferred Stock results in a
fraction, an amount equal to such fraction multiplied by the current market
price (determined as provided in subparagraph 5(C)(iv) above) of the Common
Stock on the day of conversion shall be paid to such holder in cash by the
Corporation.
(I) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized Common Stock, for the
purpose of effecting the conversion of the issued and outstanding Preferred
Stock, the full number of shares of Common Stock then deliverable in the event
and upon the conversion of all of the Preferred Stock then issued and
outstanding.
6. Voting Rights. Except as otherwise provided in this paragraph 6, each
share of Preferred Stock is entitled to one vote, voting together with the
holders of shares of Common Stock and not as a class, on each matter submitted
to a vote at a meeting of stockholders of the Corporation. In the event that
at any time two consecutive semi-annual distributions payable on the Preferred
Stock shall be in default (a "Two Dividend Default"), then immediately upon
the happening of a Two Dividend Default and until the Two Dividend Default and
all defaults in the payment of semi-annual distributions subsequent to the Two
Dividend Default shall be cured, the holders of Preferred Stock shall have the
right, voting separately as a class, to elect one-third of the Directors of
the Corporation. In the event that at any time four consecutive semi-annual
distributions payable on the Preferred Stock shall be in default (a "Four
Dividend Default"), then immediately upon the happening of such Four Dividend
Default and until such Four Dividend Default and all defaults in the payment
of semi-annual distributions subsequent to the Four Dividend Default shall be
cured, the holders of Preferred Stock shall have the right, voting separately
<PAGE>
as a class, to elect a majority of the Directors of the Corporation. The
foregoing voting rights are hereinafter collectively referred to as the
"Special Voting Rights." The Special Voting Rights shall be exercised only at
annual meetings of the stockholders of the Corporation, and only if the
holders of a majority of the outstanding shares of Preferred Stock entitled to
such Special Voting Rights are present in person or by proxy. Notwithstanding
the foregoing provisions of this paragraph 6, upon payment in full of all
defaults in the payment of semi-annual distributions subsequent to a Four
Dividend Default and of the distribution which resulted in the Four Dividend
Default, so that no more than three consecutive semi-annual distributions
remain in default, the Special Voting Rights of the holders of Preferred Stock
shall be reduced so that they shall have the right, voting separately as a
class, to elect one-third of the Directors of the Corporation. Notwithstanding
the foregoing provisions of this Paragraph 6, upon payment in full of (i) all
defaults in the payment of semi-annual distributions subsequent to a Two
Dividend Default and of the distribution which resulted in the Two Dividend
Default, or (ii) upon payment in full of all semi-annual distributions
subsequent to a Four Dividend Default and three of the distributions which
resulted in a Four Dividend Default, so that, in each such case, no more than
one semi-annual distribution remains in default, the Special Voting Rights
shall terminate, and the voting power in the election of Directors shall again
be vested equally in the holders of the Preferred Stock and the Common Stock,
who shall each be entitled to one vote per share. Each Director elected by the
holders of shares of Preferred Stock as a result of the Special Voting Rights
set forth above shall serve only until the next annual meeting of
stockholders, or until the date the Special Voting Rights shall have
terminated as provided in this paragraph 6, whichever event first occurs.
7. Registration Rights.
(A) "Piggy-Back" Registration Rights:
(i) If, at any time and from time to time after the
Corporation's first Public Offering, the Corporation proposes to register any
of its securities on Forms S-1, S-2, S-3, SB-1 or SB-2, or any successor
forms, under the Securities Act of 1933 (the "Act") and applicable state
securities laws (the "State Acts"), the Corporation shall give prompt written
notice to each holder of Preferred Stock (or Common Stock into which it has
been converted) of its intention to do so, and, upon the written request of
any such stockholder made within 30 days after the receipt of any such notice,
which written request shall specify the number of shares such stockholder
desires to be registered, the Corporation shall use its reasonable efforts to
cause all such shares of such stockholder to be registered under the Act and
State Acts to permit the sale of such shares. Notwithstanding anything
<PAGE>
contained herein to the contrary, the Corporation shall have the right to
discontinue any registration of such shares of such stockholder at any time
prior to the effective date of such registration if the registration of other
securities giving rise to such registration is discontinued.
(ii) If any stockholder shall request inclusion of any shares
held by such stockholder in the registration of other securities of the
Corporation and such proposed registration by the Corporation is, in whole or
in part, an underwritten Public Offering, and if the managing underwriter
determines and advises the Corporation in writing that inclusion in such
registration of all proposed securities (including securities being offered by
or on behalf of the Corporation and securities covered by requests for
registration) would not adversely affect the marketability of the offering of
the securities proposed to be registered by the Corporation, then such
stockholder shall be entitled to participate pro-rata with the other
stockholders having similar incidental registration rights with respect to
such registration to the extent the managing underwriter determines that such
shares may be included without such adverse effect.
(iii) The rights of such stockholders to have their shares
included in such registration shall expire on the first to occur of January 1,
2010, or that date which is 10 years after the Corporation's first Public
Offering.
(B) Demand Registration Rights: At any time after the Corporation's
first Public Offering of its stock, the Corporation shall, upon receipt of a
written request from the holders of at least 25% of the aggregate issued and
outstanding Preferred Stock and the Common Stock into which it has been
converted, prepare and file under the Act a registration statement in respect
of such shares. In the event that not all of such shares have been registered
as herein set forth, the Corporation shall, upon receipt of a written request
from the holders of at least 25% of the aggregate remaining unregistered
Preferred Stock and the Common Stock into which it has been converted, prepare
and file under the Act no more than one additional registration statement to
register the remaining balance of the shares not so registered.
(C) Expenses: The Corporation shall pay all expenses incident to its
performance of or compliance with the provisions of subparagraphs 7(A) and
7(B) hereof, including, without limitation, all registration and filing fees,
fees and expenses of compliance with the Act and State Acts, printing
expenses, messenger and delivery expenses, fees and disbursements of counsel
for the Corporation (but not the legal fees of any such stockholder) and all
independent public accountants and other persons retained by the Corporation,
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (excluding underwriting commissions and discounts).
<PAGE>
(D) Obligations of the Corporation: If and whenever the Corporation
is required to use its reasonable efforts to effect or cause the registration
of any shares under the Act as provided in this paragraph 7, the Corporation
shall, as expeditiously as possible:
(i) prepare and file with the SEC a registration statement with
respect to such shares and use its reasonable efforts to cause such
registration statement to become effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and such prospectus current for a period not in excess of nine
months as may be necessary in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of such shares such number of
copies of such registration statement and each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus), in conformity with the requirements of the Act, and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the shares owned by such seller;
(iv) use its reasonable efforts to register or qualify such
shares covered by such registration statement under such State Acts as each
seller reasonably requests, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the shares owned by such seller, except
that the Corporation shall not for any such purpose be required to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not so
qualified, to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction; and
(v) notify each seller of any such securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Act or upon the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
<PAGE>
the light of the circumstances then existing.
(E) Indemnification and Notification:
(i) The Corporation shall indemnify and hold harmless each
holder of any shares included in the Corporation's registration statement
pursuant to this paragraph 7, and each person, if any, who controls such
holder within the meaning of Section 15 of the Act, from and against any and
all losses, claims, damages, expenses and liabilities (including reasonable
attorneys' fees) caused by any untrue statement of a material fact contained
in any such registration statement, or contained in a prospectus furnished
thereunder, or in any amendment or supplement thereto or caused by any
omission to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading (provided, however, that the foregoing indemnification
and agreement to hold harmless shall not apply insofar as such
losses, claims, damages, expenses, and liabilities are caused by any such
untrue statement or omission is based upon information furnished in writing to
the Corporation by any such holder expressly for use in any registration
statement or prospectus).
(ii) Promptly after receipt by any holder of any shares
included in the Corporation's registration statement pursuant to this
paragraph 7 of notice of the commencement of any action, said holder shall, if
a claim in respect thereof is to be made against the Corporation under this
paragraph 7, notify the Corporation in writing of the commencement thereof,
but the omission so to notify the Corporation shall not relieve it from any
liability which it may have to them under this paragraph 7. In case any such
action is brought against any holder of any shares registered pursuant to this
paragraph 7 and the Corporation is notified of the commencement thereof as
provided herein, the Corporation shall be entitled to participate in, and, to
the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such holder, and after notice from the Corporation
to such holder of the Corporation's election so to assume the defense thereof,
the Corporation shall not be liable under this paragraph 7 for any legal or
other expense subsequently incurred by such holder in connection with the
defense thereof other than reasonable costs of investigation.
(iii) Each holder of any shares registered pursuant to this
paragraph 7 agrees to cooperate fully with the Corporation in effecting
registration and qualification of the Preferred Stock (or the Common Stock
into which it has been converted) and of such distribution, and shall
indemnify and hold harmless the Corporation and each person who may control
the Corporation within the meaning of Section 15 of the Act, each director of
<PAGE>
the Corporation, and each officer who signed any registration statement from
and against any and all losses, claims, damages, expenses, and liabilities
(including reasonable attorneys' fees) caused by any untrue statement of a
material fact contained in any such registration statement, or contained in a
prospectus furnished thereunder, or any amendment or supplement thereto, or
caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the extent that
such untrue statement or omission was made in reliance upon information
furnished to the Corporation by any such holder for inclusion therein.
8. Changes In Terms of Preferred Stock. The terms of the Preferred Stock
may not be amended, altered or repealed, and no class of capital stock or
securities convertible into capital stock shall be authorized which has
superior rights to the Preferred Stock as to distributions, liquidation or
vote, without the consent of the holders of at least two-thirds of the
outstanding shares of Preferred Stock.
9. No Implied Limitations. Except as otherwise provided by express
provisions of these Articles of Incorporation, nothing herein shall limit, by
inference or otherwise, the discretionary right of the Board of Directors to
classify and reclassify and issue any shares of Preferred Stock and to fix or
alter all terms thereof to the full extent provided in the Articles of
Incorporation of the Corporation.
10. General Provisions. In addition to the above provisions with respect
to the Preferred Stock, such Preferred Stock shall be subject to, and entitled
to the benefits Of, the provisions set forth in the Corporation's Articles of
Incorporation with respect to Preferred Stock generally.
11. Notices. All notices required or permitted to be given by the
Corporation with respect to the Preferred Stock shall be in writing, and if
delivered by first class United States mail, postage prepaid, to the holders
of the Preferred Stock at their last addresses as they shall appear upon the
books of the Corporation, shall be conclusively presumed to have been duly
given, whether or not the stockholder actually receives such notice; provided,
however, that failure to duly give such notice by mail, or any defect in such
notice, to the holders of any stock designated for redemption, shall not
affect the validity of the proceedings for the redemption of any other shares
of Preferred Stock.
<PAGE>
ARTICLE VII
"SHARK REPELLANT" PROVISIONS DILUTING THE VOTING POWER OF
BENEFICIAL OWNERS OF MORE THAN 10 PERCENT OF OUTSTANDING SHARES
The total number of shares of all classes of common stock which the
Corporation has authority to issue is 40,000,000 shares, consisting of twenty
million (20,000,000) shares of common stock ("Common Stock") and twenty
million (20,000,000) shares of common stock nonvoting ("Common Stock
Nonvoting").
The following is a description of each class of stock of the Corporation,
including the preferences, conversion and other rights, voting powers,
qualifications, limitations as to distributions, restrictions and terms and
conditions of redemption, in respect to each class:
(a) The Common Stock shall have exclusive voting rights and powers except
as set forth in Subparagraph (c) of this Article; and subject, however, to the
provisions set forth in Subparagraph (b) of this Article.
(b)(1) From and after the date any person first becomes a Substantial
Stockholder (as defined in clause (2)(H) of this Subparagraph) until such time
as such person shall cease to be a Substantial Stockholder, the shares of
Common Stock beneficially owned by the Substantial Stockholder shall have
limited voting rights on any matter requiring their vote or consent. The
voting rights shall be limited as follows:
(A) The Substantial Stockholder (or the record owner(s)
thereof) shall be entitled to one vote for each share beneficially owned by
the Substantial Stockholder not in excess of 20% of the then issued and
outstanding shares of Common Stock.
(B) For all shares of Common Stock beneficially owned by the
Substantial Stockholder in excess of 20% of the then issued and outstanding
shares of Common Stock, the Substantial Stockholder (or the record owner(s)
thereof) shall not be entitled to cast any votes in respect of such shares and
such shares shall be deducted from the total number of shares of Common Stock
outstanding for purposes of determining the proportion of Common Stock
required to approve a matter submitted for stockholder approval or to
constitute a quorum. To the extent that the Substantial Stockholder is
comprised of more than one record owner, the aggregate voting power of the
Substantial Stockholder (or such record owners) so limited for all shares of
Common Stock beneficially owned by the Substantial Stockholder shall be
allocated proportionately among such record owners. For each such record
owner, this allocation shall be accomplished by multiplying the aggregate
voting power of the then outstanding shares of Common Stock owned by the
Substantial Stockholder by a fraction whose numerator is the number of shares
of Common Stock owned of record by such record owner and whose denominator is
<PAGE>
the total number of shares of Common Stock beneficially owned by the
Substantial Stockholder. A person who is record owner of shares of Common
Stock that are beneficially owned simultaneously by more than one person shall
have, with respect to such shares, the right to cast the least number of votes
that such person would be entitled to cast under this Subparagraph (b) by
virtue of such shares being so beneficially owned by any of such persons.
(2) For purposes of this Subparagraph (b), the following words have
the meanings indicated:
(A) "Affiliate," including the term "Affiliated Person," means
a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, a specified
person, and includes all Associates of such person.
(B) "Associate," when used to indicate a relationship with any
person, means:
(1) Any corporation or organization (other than the
Corporation or a Subsidiary of the Corporation) of which such person is an
officer, director, or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities;
(2) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee
or in a similar fiduciary capacity; and
(3) Any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a director or
officer of any corporation controlling, under common control with or
controlled by such person or of any of its Affiliates.
(C) "Beneficial Owner," when used with respect to any Common
Stock, means a person:
(1) That, individually or with any of its Affiliates,
beneficially owns Common Stock, directly or indirectly; or
(2) That, individually or with any of its Affiliates, has:
(i) The right to acquire Common Stock (whether such
right is exercisable immediately or only after the passage of time), pursuant
to any agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise; or
<PAGE>
(ii) The right to vote Common Stock pursuant to any
agreement, arrangement, or understanding; or
(3) That has any agreement, arrangement, or understanding
for the purpose of acquiring, holding, voting, or disposing of Common Stock
with any other person that beneficially owns, or whose Affiliates beneficially
own, directly or indirectly, such shares of Common Stock; provided, however,
that for purposes of the definition of Beneficial Owner and beneficial
ownership, (i) no director, officer or employee of the Corporation or any
Subsidiary (nor any Affiliate of any such director, officer or employee) shall
solely by reason of any or all of such directors, officers or employees acting
in their capacities as such (including, without limitation, communicating with
a stockholder by reason of the Board of Directors) be deemed, for any purposes
hereof, to beneficially own any shares of Common Stock beneficially owned by
any other such director, officer, employee or stockholder (or any Affiliate
thereof); (ii) in the case of any employee stock ownership of similar plan of
the Corporation or of any Subsidiary heretofore or hereafter adopted in which
the beneficiaries thereof possess the right to vote or to direct the voting of
shares of Common Stock held by such plan, no such plan, any entity organized,
appointed or established by the Corporation or any Subsidiary for or pursuant
to any plan, nor any trustee or any member of an administrative committee or
any other representative with respect thereto (nor any Affiliate of such
trustee, administrative committee member or other such representative), solely
by reason of such capacity of such trustee, administrative committee member or
other such representative, shall be deemed, for any purposes hereof, to
beneficially own any shares of Common Stock held under any such plan; (iii) a
person shall not be deemed a beneficial owner of Common Stock solely by reason
of a revocable proxy granted for a particular meeting of stockholders,
pursuant to a public solicitation of proxies for such meeting complying with
applicable rules of the Securities and Exchange Commission or any successor
administrative body, with respect to shares of which neither such person nor
any Affiliate of such person is otherwise deemed the beneficial owner; and
(iv) a person shall not be deemed a beneficial owner of Common Stock solely by
reason of Common Stock being tendered pursuant to a tender or exchange offer
made by such person or such person's Affiliates until such tendered Common
Stock is accepted for purchase or exchange.
(D) "Common Stock" means the authorized shares of capital stock
of the Corporation entitled to vote generally in the election of directors and
does not mean the authorized shares of Common Stock Nonvoting.
<PAGE>
(E) "Control," including the terms "Controlling," "controlled
by" and "under common control with," means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting securities,
by contract, or otherwise, and the beneficial ownership of 10% or more of the
votes entitled to be cast by a corporation's voting stock creates a
presumption of control.
(F) "Person" shall mean any individual, firm, partnership,
corporation or other entity.
(G) "Subsidiary" means any corporation of which voting stock
having a majority of the votes entitled to be cast is owned, directly or
indirectly, by the Corporation.
(H) "Substantial Stockholder" shall mean any person, other than
the Corporation or any Subsidiary, who or which is the Beneficial Owner,
directly or indirectly, of 20% or more of the outstanding shares of Common
Stock (determined solely on the basis of the total number of shares so
beneficially owned and without giving effect to the number of percentage of
votes entitled to be cast in respect of such shares) in relation to the total
number of shares of Common Stock issued and outstanding.
(4) For purposes of computing the percentage beneficial
ownership of shares of Common Stock of a person in order to determine whether
such person is a Substantial Stockholder, the outstanding shares of Common
Stock shall be deemed to include shares of Common Stock which may be issuable
(except pursuant to clause (7) of this Subparagraph (b)) by the Corporation
pursuant to any agreement, or upon the exercise of conversion rights,
warrants, or options or otherwise and which are deemed owned by such person
through application of the definition of Beneficial Owner but shall not
include any other shares of Common Stock which may be issuable by the
Corporation to others pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise. For all other purposes,
the outstanding shares of Common Stock shall include such shares then
outstanding and shall not include any shares of Common Stock which may be
issuable by the Corporation pursuant to any agreement, or upon the exercise of
conversion rights, warrants or options, or otherwise.
<PAGE>
(5) The Board of Directors shall have the power to
determine for the purposes of this Subparagraph (b) on the basis of
information known to them (i) the number of shares of Common Stock
beneficially owned by any person; (ii) whether a person is an Affiliate or
Associate of another; (iii) whether a person has an agreement, arrangement or
understanding with another; (iv) the redemption price as provided for in
clause (8) below; and (v) any other factual matter relating to the
applicability or effect of this Subparagraph (b).
(6) The Corporation shall have the right to demand that
any person who it reasonably believes is a Substantial Stockholder (or holds
record shares of Common Stock beneficially owned by a person reasonably
believed to be a Substantial Stockholder) supply the Corporation with complete
information as to: (i) the record owner(s) of all shares of Common Stock and
Common Stock Nonvoting beneficially owned by such persons; (ii) the number of,
and class of, shares beneficially owned by such person and held of record by
each such record owner and the number(s) of the stock certificate(s)
evidencing such shares; (iii) each date or dates on which such person or the
record owner(s) of such shares purchased the shares; and (iv) any other
factual matter relating to the applicability or effect of this Subparagraph
(b) as may reasonably be requested of such person, and such person shall
furnish such information within 10 days after the receipt of such demand.
(7) Except as otherwise provided by law or as expressly
provided in this clause (7), the presence, in person or by proxy, of the
holders of record of shares of capital stock of the Corporation entitling the
holders thereof to cast a majority of the votes (after giving effect, if any,
to the provisions of this Subparagraph (b)) entitled to be cast by the holders
of shares of capital stock of the Corporation entitled to vote shall
constitute a quorum at all meetings of the shareholders, and every reference
in these Articles of Incorporation to a majority or other proportion of
capital stock (or the holders thereof) for purposes of determining any quorum
requirement or any requirement for shareholders' consent or approval shall be
deemed to refer to such majority or other proportion of the votes (or the
holders thereof) then entitled to be cast in respect of such capital stock.
(8) All outstanding shares of Common Stock Nonvoting shall
automatically, without any further act or deed on the part of the Corporation
or any other person, be converted into shares of Common Stock on a
share-for-share basis at such time (the "Conversion Date") as any Substantial
Stockholder beneficially owns shares of Common Stock which entitle such
Substantial Stockholder (after giving effect to the provisions of this
Subparagraph (b) other than the conversion contemplated by this clause (7)) to
cast more than 50% of the votes entitled to be cast by the holders of the then
outstanding shares of Common Stock. In the event of an automatic conversion of
Common Stock Nonvoting pursuant to this clause (7), certificates formerly
<PAGE>
representing shares of Common Stock Nonvoting will thereafter be deemed to
represent a like number of shares of Common Stock. Effective as of the
Conversion Date, the provisions of these Articles of Incorporation which
provide for the establishment and terms and rights of the Common Stock
Nonvoting shall, without any further action of the Board of Directors or
stockholders of the Corporation or any other person, be of no further force or
effect.
(9) At any time after the Board of Directors determines
that a person is a Substantial Stockholder (the "Determination Date") until
the date on which (i) such person is no longer a Substantial Stockholder; or
(ii) such person beneficially owns more than 90% of the then outstanding
shares of each class of Common Stock of the Corporation, the Corporation shall
have the right to redeem from the record owner or owners, at any time or from
time to time, all or a portion of the shares of Common Stock and Common Stock
Nonvoting beneficially owned by the Substantial Stockholder. The Corporation
shall exercise the right of redemption by written notice (the "Redemption
Notice") to the Substantial Stockholder, which notice shall be signed by the
Chairman of the Board, the President or any Vice President of the Corporation.
During the one-year period commencing on the Determination Date, the
redemption price shall be the lesser of: (i) the average "market price" of
shares of Common Stock Nonvoting for each of the 30 trading days in which
shares of Common Stock Nonvoting shall have been traded immediately preceding
the date of the Redemption Notice; and (ii) the average "market price" of
shares of Common Stock Nonvoting for each of the 30 trading days in which
shares of Common Stock Nonvoting shall have been traded immediately preceding
the date on which the Substantial Stockholder first beneficially owned 5% or
more of the outstanding shares of Common Stock, such price to be adjusted for
any stock splits, stock distributions, recapitalizations or the like which
occurred between such date and the date of the Redemption Notice. Subsequent
to the expiration of the one-year period commencing on the Determination Date,
the redemption price shall equal the price determined under clause (i) of the
immediately preceding sentence. The "market price" of shares of Common Stock
(whether Common Stock or Common Stock Nonvoting) shall mean the closing bid
price of the shares of Common Stock Nonvoting, as published by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), (or
such other quotation system of a national securities association then being
used), or if the shares are then traded on a national securities exchange, the
last sale price regular way thereafter as reported in the consolidated
transaction reporting system for the shares listed or traded on such exchange.
All rights of the Substantial Stockholder as the beneficial owner of shares of
Common Stock (and all rights of the record owners) shall cease as to the
shares which are the subject of a Redemption Notice. Closing for the purchase
of the shares to be redeemed shall be made within 45 days of the date of the
Redemption Notice. If there is more than one record owner of the shares of
Common Stock beneficially owned by the Substantial Stockholder, the
Corporation shall, to the extent the Board of Directors deems it practicable,
redeem the shares of each such class to be redeemed from each of the record
<PAGE>
owners on a pro rata basis based on the total number of shares of the class
to be redeemed owned by each such record owner.
(10) Any determinations made by the Board of Directors
pursuant to this Subparagraph (b), in good faith on the basis of such
information and assistance as was then reasonably available for such purpose,
shall be conclusive and binding upon the Corporation and its shareholders,
including any Substantial Stockholder.
(11) Nothing contained in this Subparagraph (b) shall be
construed to relieve any Substantial Stockholder from any fiduciary
obligation imposed by law.
(12) Any amendment, alteration, change or repeal of this
Subparagraph (b) shall, in addition to any other vote or approval required by
law or these Articles of Incorporation, require (i) the affirmative vote of
the holders of at least 80% of the total number of votes entitled to be cast
by the holders of all of the then outstanding shares of Common Stock (as
determined in accordance with the provisions of this Subparagraph (b)), voting
as a single class; and (ii) the affirmative vote of the holders of at least
80% of the then outstanding shares of Common Stock Nonvoting, voting as a
separate class.
(13) Notwithstanding anything to the contrary in these
Articles of Incorporation, in the event that, as a result of the enactment in
the future of any law, rule or regulation binding upon the Corporation, the
shares of Common Stock Nonvoting will become ineligible to be quoted and will
cease to be quoted by NASDAQ or any successor entity and upon such quote
cessation will not be listed or admitted to trading on any national securities
exchange solely due to the vote limitations contained in clause (1) of this
Subparagraph (b), such determination to be made by the Board of Directors of
the Corporation, the provisions of these Articles of Incorporation providing
for the vote limitation on the votes entitled to be cast by a Substantial
Stockholder shall, without further action or deed by the Corporation, its
directors or stockholders or any other person, be of no further force or
effect, effective as of the latest date on which such law, rule or regulation
permits or requires such a provision to become ineffective, to the extent
necessary in order for the Common Stock Nonvoting to remain eligible for
quotation on NASDAQ or any successor entity or be eligible for listing on any
national securities exchange.
<PAGE>
(c) Each share of the Common Stock Nonvoting shall have exactly the same
rights, terms and conditions as each share of Common Stock, except that the
shares of Common Stock Nonvoting shall have no voting rights, except the
Common Stock Nonvoting shall have the right to vote on: (1) a consolidation of
the Corporation with another corporation, (2) a merger of the Corporation into
another corporation, (3) a merger of the Corporation where the Corporation is
the surviving corporation but the capital stock of the Corporation is
converted into other securities or property, (4) a participation by the
Corporation in a statutory share exchange whereby the capital stock of the
Corporation is converted into other securities or property, (5) a dissolution
of the Corporation, (6) a sale of all or substantially all of the assets of
the Corporation not in the ordinary course of business, and (7) any amendment
of these Articles of Incorporation repealing the right of the Common Stock
Nonvoting to vote on any of the matters specified in this Subparagraph. As to
all matters on which the Common Stock Nonvoting is entitled to vote, the
Common Stock Nonvoting shall vote separately as one class, and the Common
Stock shall vote separately as another class. The right of the Common Stock
Nonvoting to vote cannot be repealed except by (a) the affirmative vote of the
holders of a majority of the outstanding shares of the Common Stock Nonvoting,
voting separately as one class; and (b) the affirmative vote of the holders of
a majority of the total number of votes entitled to be cast by the holders of
all the outstanding shares of the Common Stock (after taking into account the
provisions of Subparagraph (b) immediately preceding this Subparagraph(c)),
voting separately as another class. The provisions of this Subparagraph (c)
providing that the Common Stock and the Common Stock Nonvoting vote as
separate classes cannot be amended, altered, changed or repealed except by (i)
the affirmative vote of the holders of at least 80% of the total number of
votes entitled to be cast by the holders of all the then outstanding shares of
Common Stock (after taking into account the provisions of Subparagraph (b)
immediately preceding this Subparagraph (c)), voting separately as one class;
and (ii) the affirmative vote of the holders of at least 80% of the total
number of votes entitled to be cast by the holders of all of the then
outstanding shares of Common Stock Nonvoting, voting separately as another
class. The rights granted to Common Stock Nonvoting are not a limitation of
any kind upon the sole and exclusive voting rights and powers of the Common
Stock except in the limitations before set forth.
<PAGE>
ARTICLE VIII
SPECIAL PROVISIONS WHEN TWO CLASSES OF COMMON STOCK ARE
AUTHORIZED IN THE ARTICLES OF INCORPORATION
Election and Filling of Vacancies. With respect to the election of the
Board of Directors of the Corporation:
(1) the holders of Class A Common Stock (a) shall nominate and elect one
(1) director who shall be known as the Class A Director, and (b) in the event
of the death, disability, removal, resignation or refusal to act of the Class
A Director, the holders of Class A Common Stock, to the exclusion of the
holders of all other classes of stock of the Corporation, shall nominate and
elect a director to fill the vacancy so created by such death, disability,
removal, resignation or refusal to act; and
(2) the holders of Class B Common Stock (a) shall nominate and elect two
(2) directors who shall be known as the Class B Directors, and (b) in the
event of the death, disability, removal, resignation or refusal to act of any
or all of the Class B Directors, the holders of the Class B Common Stock, to
the exclusion of the holders of all other classes of stock of the Corporation,
shall nominate and elect one or more directors to fill the vacancy or
vacancies so created by such death, disability, removal, resignation or
refusal to act.
ARTICLE IX
HIGH QUORUM PROTECTIVE PROVISIONS
Quorum. The presence in person or by proxy of the holders of record of
all of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of the stockholders, except as otherwise provided by the Colorado
Business Corporation Act, by the Articles of Incorporation or by these Bylaws.
If less than a quorum shall be in attendance at the time for which the meeting
shall have been called, the meeting may be adjourned from time to time by a
majority vote of the stockholders present or represented, without any notice
other than by announcement at the meeting, until a quorum shall attend. At any
adjourned meeting at which a quorum shall attend, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
<PAGE>
ARTICLE X
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
or preferential right to purchase, subscribe for, or otherwise acquire any
unissued or treasury shares of stock of the corporation, or any options or
warrants to purchase, subscribe for or otherwise acquire any such unissued or
treasury shares, or any shares, bonds, notes, debentures, or other securities
convertible into or carrying options or warrants to purchase, subscribe for or
otherwise acquire any such unissued or treasury shares.
ARTICLE XI
CUMULATIVE VOTING
The shareholders shall not be entitled to cumulative voting.
ARTICLE XII
SHARE TRANSFER RESTRICTIONS
The corporation shall have the right to impose restrictions upon the
transfer of any of its authorized shares or any interest therein. The board
of directors is hereby authorized on behalf of the corporation to exercise the
corporation's right to so impose such restrictions.
ARTICLE XIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation shall be
17 West Cheyenne Mountain Boulevard, Colorado Springs, CO 80906, and the name
of the initial registered agent at such address is Mark T. Thatcher, Esq.
Either the registered office or the registered agent may be changed in the
manner provided by law.
THE UNDERSIGNED CONSENTS TO THE APPOINTMENT AS
THE INITIAL REGISTERED AGENT
______________________________
REGISTERED AGENT
<PAGE>
ARTICLE XIV
BOARD OF DIRECTORS
The board of directors of the corporation shall consist of no more than
nine (9) directors, and the names and addresses of the persons who are serving
as directors until their successors are elected and shall qualify are as
follows:
Name Title Address
Larry Bestor President, 460 Cedar Street
Chairman of the Board Fond du Lac, WI 54935
William Geenen CFO/Treasurer 460 Cedar Street
Fond du Lac, WI 54935
Blade Thomas Vice President 460 Cedar Street
Fond du Lac, WI 54935
Mark Thatcher Secretary 460 Cedar Street
Fond du Lac, WI 54935
Steven Sorenson Director 460 Cedar Street
Fond du Lac, WI 54935
Dr. William Sybesma Director 460 Cedar Street
Fond du Lac, WI 54935
The number of directors shall be fixed in accordance with the bylaws.
ARTICLE XV
INDEMNIFICATION
The corporation may:
(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, fiduciary or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorney fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit,
or proceeding, if he
<PAGE>
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
proceeding, 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 his conduct was unlawful.
(B) The corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney 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 fairl
y and reasonably entitled to indemnification for such expenses which such
court deems proper.
(C) To the extent that a director, officer, employee, fiduciary or
agent of a corporation has been successful on the merits in defense of any
action, suit, or proceeding referred to in (A) or (B) of this Article XI or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorney fees) actually and reasonably incurred by
him in connection therewith.
(D) Any indemnification under (A) or (B) of this Article XI (unless
ordered by a court) and as distinguished from (C) of this Article shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee,
fiduciary or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in (A) or (B) above. 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, if
a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or by the shareholders.
(E) Expenses (including attorney fees) incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding as authorized in
(C) or (D) of this Article XI upon receipt of an undertaking by or on behalf
of the director, officer, employee, fiduciary 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 XI.
(F) The indemnification provided by this Article XI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, 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, fiduciary or agent and shall inure to the benefit
of heirs, executors, and administrators of such a person.
(G) The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, fiduciary or agent of
the corporation or who is or was serving at the request of the corporation as
a director, officer, employee, fiduciary 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 provisions of this Article XI.
ARTICLE XVI
TRANSACTIONS WITH INTERESTED DIRECTORS
No contract or other transaction between the corporation and one (1) or
more of its directors or any other corporation, firm, association, or entity
in which one (1) 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:
(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 or consents of such interested directors;
(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.
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.
<PAGE>
ARTICLE XVII
VOTING OF SHAREHOLDERS
If a quorum is present, the affirmative vote of a majority of the
outstanding shares represented at the meeting and entitled to vote thereon, or
of any class or series, shall be the act of the shareholders.
IN WITNESS WHEREOF, the corporation ratified and signed these Articles of
Incorporation on June 12, 1998.
ATI NETWORKS, INC.
LARRY BESTOR,
President, Chairman of the Board
BYLAWS
OF
ATINETWORKS, INC.
(AMENDED AS OF JUNE 1, 1998)
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL OFFICE. The principal office of the corporation in
the State of Wisconsin shall be located in the City of Fond du Lac, Wisconsin.
The corporation may have such other offices, either within or outside of the
State of Colorado, as the Board of Directors may designate, or as the business
of the corporation may require from time to time.
Section 1.2 REGISTERED OFFICE. The registered office of the corporation,
required by the Colorado Business Corporation Act to be maintained in the
State of Colorado, may be, but need not be, identical with the principal
office in the State of Colorado, and the address of the registered office may
be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 2.1 ANNUAL MEETING. The annual meeting of the shareholders shall
be held on the last Tuesday of April in each year, commencing with the year
1999, at the hour of 10:00 A.M., or at such other time on such other day as
shall be fixed 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. If the day fixed for the annual meeting shall be a legal holiday
in the State of Colorado, such meeting shall be held on the next succeeding
business day. If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of the shareholders as soon thereafter as may be
convenient.
<PAGE>
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call or of proper demand for a
special meeting and notice of the special meeting was not given within thirty
days after the date of the call or the date the last of the demands necessary
to require calling of the meeting was received by the corporation pursuant to
C.R.S. § 7-107-102(1)(b), or the special meeting was not held in
accordance with the notice.
Section 2.2 SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President upon the receipt of one or more written demands for a special
meeting, stating the purpose or purposes for which it is to be held, signed
and dated by the holders of shares representing at least ten percent of all
the votes entitled to be cast on any issue proposed to be considered at the
meeting.
Section 2.3 PLACE OF MEETINGS. The Board of Directors may designate any
place, either within or outside of the State of Colorado, as the place of
meeting for any annual meeting or for any special meeting called by the Board
of Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation
in the State of Colorado.
Section 2.4 NOTICE OF MEETING. Written notice stating the place, day and
hour of the meeting of shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall, unless otherwise
prescribed by statute, be delivered not less than ten nor more than sixty days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the officer or other persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting; provided, however, that if the number of authorized shares is to be
increased, at least thirty days' notice shall be given.
<PAGE>
Notice of a special meeting shall include a description of the purpose or
purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity
which this corporation controls, in each case with or without the goodwill,
(iv) a dissolution of the corporation, or (v) any other purpose for which a
statement of purpose is required by the Colorado Business Corporation Act.
Notice shall be given personally or by mail, private carrier, telegraph,
teletype, electronically transmitted facsimile or other form of wire or
wireless communication by or at the direction of the president, the secretary,
or the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed and if in a comprehensible form,
such notice shall be deemed to be given and effective when deposited in the
United States mail, addressed to the shareholder at his address as it appears
in the corporation's current record of shareholders, with postage prepaid. If
notice is given other than by mail, and provided that such notice is in a
comprehensible form, the notice is given and effective on the date received
by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
notice shall be given at corporate expense.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for
the adjourned meeting, a new notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting as of the new
record date.
<PAGE>
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver shall
be delivered to the corporation for filing with the corporate records.
Further, by attending a meeting either in person or by proxy, a shareholder
waives objection to lack of notice or defective notice of the meeting unless
the shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of
notice or defective notice. By attending the meeting, the shareholder also
waives any objection to consideration in the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
No notice need be sent to any shareholder if three successive notices
mailed to the last known address of such shareholder have been returned as
undeliverable until such time as another address for such shareholder is made
known to the corporation by such shareholder. In order to be entitled to
receive notice of any meeting, a shareholder shall advise the corporation in
writing of any change in such shareholder's mailing address as shown on the
corporation's books and records.
Section 2.5 MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall
meet at any time and place, either within or outside of the State of Colorado,
and consent to the holding of a meeting at such time and place, such meeting
shall be valid without call or notice, and at such meeting any corporate
action may be taken.
Section 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any distribution, or in order to make a determination of
shareholders for any other purpose, the Board of Directors of the corporation
may provide that the share transfer books shall be closed for a stated period
but not to exceed, in any case, seventy days. If the share 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 days immediately preceding such meeting. In lieu of closing the
share transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case
to be not more than seventy days and, in case of a meeting of shareholders,
not less than ten days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If the share
transfer books are not closed and no record date is fixed for the
<PAGE>
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a distribution,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such distribution is adopted,
as the case may be, shall be the record date for such determination of
shareholders. 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 meeting is
adjourned to a date more than one hundred twenty days after the date fixed for
the original meeting, in which case the Board of Directors shall make a new
determination as provided in this section.
Section 2.7 VOTING RECORD. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten
days before such meeting of shareholders, a complete record of the
shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged by voting groups and within each voting group by
class or series of shares, in alphabetical order within each class or series,
with the address of and the number of shares held by each shareholder in each
class or series. For a period beginning the earlier of ten days before the
meeting for which the record was prepared or two business days after notice of
the meeting is given and continuing through the meeting, the record shall be
kept on file at the principal office of the corporation or at a place
identified in the notice of the meeting in the city where the meeting will be
held, whether within or outside of the State of Colorado, and shall be subject
to inspection by any shareholder upon written demand at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as to
who are the shareholders entitled to examine the record or transfer books or
to vote at any meeting of shareholders.
Section 2.8 QUORUM. A majority of the votes entitled to be cast on the
matter by a voting group, represented in person or by proxy, constitutes a
quorum of that voting group for action on that matter. If no specific voting
group is designated in the Articles of Incorporation or under the Colorado
Business Corporation Act for a particular matter, all outstanding shares of
the corporation entitled to vote, represented in person or by proxy, shall
constitute a voting group. In the absence of a quorum at any such meeting, a
majority of the shares so represented may adjourn the meeting from time to
<PAGE>
time for a period not to exceed one hundred twenty days without further
notice. However, if the adjournment is for more than one hundred twenty days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record entitled to vote at the meeting.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal during such meeting of that number of
shareholders whose absence would cause there to be less than a quorum.
Section 2.9 MANNER OF ACTING. If a quorum is present, an action is
approved if the votes cast favoring the action exceed the votes cast within
the voting group opposing the action and such action shall be the act of the
shareholders, unless the vote of a greater proportion or number or voting by
groups is otherwise required by the Colorado Business Corporation Act, the
Articles of Incorporation or these Bylaws.
Section 2.10 PROXIES. At all meetings of shareholders a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his or her duly authorized attorney-in-fact. A shareholder
may also appoint a proxy by transmitting or authorizing the transmission of a
telegram, teletype, or other electronic transmission providing a written
statement of the appointment to the proxy, a proxy solicitor, proxy support
service organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from which
it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar writing
shall be filed with the secretary of the corporation before or at the time of
the meeting. The appointment of a proxy is effective when received by the
corporation and is valid for eleven months unless a different period is
expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could
be used.
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Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his or her authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his or her authority under the appointment.
Other notice of revocation may, in the discretion of the corporation, be
deemed to include the appearance at a shareholders' meeting of the shareholder
who granted the proxy and his or her voting in person on any matter subject
to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
or her authority under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by
the shareholder (including a shareholder who is a successor to the shareholder
who granted the proxy) either personally or by his or her attorney-in-fact,
notwithstanding that the revocation may be a breach of an obligation of the
shareholder to another person not to revoke the appointment.
Section 2.11 VOTING OF SHARES. Unless otherwise provided by these Bylaws
or the Articles of Incorporation, each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders, and each fractional share shall be entitled to a
corresponding fractional vote on each such matter. Only shares are entitled
to vote.
Section 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS. If the name on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
<PAGE>
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and
to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be that
of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment or
proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to
the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner
or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign
for the shareholder has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or fiduciaries
and the name signed purports to be the name of at least one of the co-tenants
or fiduciaries, and the person signing appears to be acting on behalf of all
the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment or
proxy appointment revocation is otherwise proper under rules established by
the corporation that are not inconsistent with this Section 2.12.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
<PAGE>
Neither the corporation nor any of its directors, officers employees, or
agents who accepts or rejects a vote, consent, waiver, proxy appointment or
proxy appointment revocation in good faith and in accordance with the
standards of this Section is liable in damages for the consequences of the
acceptance or rejection.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders of the redemption price on surrender
of the shares.
Section 2.13 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Unless the
Articles of Incorporation or these Bylaws provide otherwise, action required
or permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is evidenced by one or more written consents describing
the action taken, signed by each shareholder entitled to vote and delivered to
the Secretary of the corporation for inclusion in the minutes or for filing
with the corporate records. Action taken under this section is effective when
all shareholders entitled to vote have signed the consent, unless the consent
specifies a different effective date.
Any such writing may be received by the corporation by electronically
transmitted facsimile or other form of wire or wireless communication
providing the corporation with a complete copy thereof, including a copy of
the signature thereto. The shareholder so transmitting such a writing shall
furnish an original of such writing to the corporation, but the failure of the
corporation to receive or record such original writing shall not affect the
action so taken.
The record date for determining shareholders entitled to take action
without a meeting shall be the date the written consent is first received by
the corporation.
Section 2.14 VOTING BY BALLOT. Voting on any question or in any election
may be by voice vote unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
Section 2.15 NO CUMULATIVE VOTING. No shareholder shall be permitted to
cumulate his or her votes.
<PAGE>
Section 2.16 WAIVER OF NOTICE. When any notice is required to be given to
any shareholder, a waiver thereof in writing signed by the person entitled to
such notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
The attendance of a shareholder at any meeting shall constitute a waiver
of notice, waiver of objection to defective notice of such meeting, or a
waiver of objection to the consideration of a particular matter at the
shareholder meeting unless the shareholder, at the beginning of the meeting,
objects to the holding of the meeting, the transaction of business at the
meeting, or the consideration of a particular matter at the time it is
presented at the meeting.
Section 2.17 PARTICIPATION BY ELECTRONIC MEANS. Any shareholder may
participate in any meeting of the shareholders by means of telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 GENERAL POWERS. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 3.2 PERFORMANCE OF DUTIES. A director of the corporation shall
perform his or her duties as a director, including his or her duties as a
member of any committee of the board upon which he or she may serve, in good
faith, in a manner he or she 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. In performing his duties,
a director shall be entitled to rely on information, opinions, reports, or
statements, including financial statements and other financial data, in each
case prepared or presented by persons and groups listed in paragraphs (a),
(b), and (c) of this Section 3.2; but he or she shall not be considered to be
acting in good faith if he or she has knowledge concerning the matter in
question that would cause such reliance to be unwarranted. A person who so
performs his or her other duties shall not have any liability by reason of
being or having been a director of the corporation. Those persons and groups
on whose information, opinions, reports, and statements a director is
entitled to rely are:
<PAGE>
(a) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to matters
which the director reasonably believes to be within such persons'
professional or expert competence; or
(c) A committee of the board upon which he or she does not serve, duly
designated in accordance with the 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.
Section 3.3 NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the corporation shall be fixed from time to time by resolution of the Board
of Directors, but in no instance shall there be less than one director. Each
director shall hold office as prescribed by written agreement, or until the
next annual meeting of shareholders, or until his or her successor shall have
been elected and qualified. Directors need not be residents of the State of
Colorado or shareholders of the corporation.
There shall be a Chairman of the Board, who has been elected from among
the directors. He or she shall preside at all meetings of the stockholders and
of the Board of Directors. He or she shall have such other powers and duties
as may be prescribed by the Board of Directors.
There shall be at least two (2) independent directors as defined by the
Colorado Business Corporation Act of 1994, as amended.
Section 3.4 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Colorado, for the holding of additional regular meetings without
other notice than such resolution.
Section 3.5 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of Colorado,
as the place for holding any special meeting of the Board of Directors called
by them.
<PAGE>
Section 3.6 NOTICE. Written notice of any special meeting of directors
shall be given as follows:
By mail to each director at his or her business address at least two
days prior to the meeting; or
By personal delivery, facsimile or telegram at least twenty-four hours
prior to the meeting to the business address of each director, or in the event
such notice is given on a Saturday, Sunday or holiday, to the residence
address of each director. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, so addressed, with postage
thereon prepaid. If notice is given by facsimile, such notice shall be deemed
to be delivered when a confirmation of the transmission of the facsimile has
been received by the sender. If notice be given by telegram, such notice
shall be deemed to be delivered when the telegram is delivered to the telegraph
company.
Any director may waive notice of any meeting.
The attendance of a director at any meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice
or waiver of notice of such meeting.
When any notice is required to be given to a director, a waiver thereof
in writing signed by such director, whether before, at or after the time
stated therein, shall constitute the giving of such notice.
Section 3.7 QUORUM. A majority of the number of directors fixed by or
pursuant to Section 3.2 of this Article III, or if no such number is fixed, a
majority of the number of directors in office immediately before the meeting
begins, shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
<PAGE>
Section 3.8 MANNER OF ACTING. Except as otherwise required by law or by
the Articles of Incorporation, the affirmative vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
Section 3.9 INFORMAL ACTION BY DIRECTORS OR COMMITTEE MEMBERS.
Unless the Articles of Incorporation or these By-laws provide otherwise, any
action required or permitted to be taken at a meeting of the board of directors
or any committee designated by said board may be taken without a meeting if the
action is evidenced by one or more written consents describing the action taken,
signed by each director or committee member, and delivered to the Secretary
for inclusion in the minutes or for filing with the corporate records. Action
taken under this section is effective when all directors or committee members
have signed the consent, unless the consent specifies a different effective
date. Such consent has the same force and effect as a unanimous vote of the
directors or committee members and may be stated as such in any document.
Section 3.10 PARTICIPATION BY ELECTRONIC MEANS. Any members of the Board
of Directors or any committee designated by such Board may participate in a
meeting of the Board of Directors or committee by means of telephone conference
or similar communications equipment by which all persons participating in the
meeting can hear each other at the same time. Such participation shall
constitute presence in person at the meeting.
Section 3.11 VACANCIES. Any vacancy on the Board of Directors may be
filled by the affirmative vote of a majority of the shareholders or the Board
of Directors. If the directors remaining in office constitute fewer than a
quorum of the board, the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected
by the shareholders, the director shall hold office for the unexpired term of
his or her predecessor in office; except that, if the director's predecessor
was elected by the directors to fill a vacancy, the director elected by the
shareholders shall hold the office for the unexpired term of the last
predecessor elected by the shareholders.
If the vacant office was held by a director elected by a voting group of
shareholders, only the holders of shares of that voting group are entitled to
vote to fill the vacancy if it is filled by the shareholders, and, if one or
more of the remaining directors were elected by the same voting group, only
<PAGE>
such directors are entitled to vote to fill the vacancy if it is filled by
the directors.
Section 3.12 RESIGNATION. Any director of the corporation may resign at
any time by giving written notice to the Secretary of the corporation. The
resignation of any director shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. When one or more directors shall resign from
the board, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective.
Section 3.13 REMOVAL. Subject to any limitations contained in the
Articles of Incorporation, any director or directors of the corporation may be
removed at any time, with or without cause, in the manner provided in the
Colorado Business Corporation Act.
Section 3.14 COMMITTEES. By resolution adopted by a majority of the Board
of Directors, the directors may designate two or more directors to constitute
a committee, any of which shall have such authority in the management of the
corporation as the Board of Directors shall designate and as shall be
prescribed by the Colorado Business Corporation Act and Article XI of these
Bylaws.
Section 3.15 COMPENSATION. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, or the Board of
Directors, each director may be paid his or her expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as director or a fixed sum for attendance at each meeting of the Board
of Directors or both. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Section 3.16 PRESUMPTION OF ASSENT. A director of the corporation
who is present at a meeting of the Board of Directors or committee of the board
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless (i) the director objects at the beginning
of the meeting, or promptly upon his or her arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his or her dissent or abstention as to any
<PAGE>
specific action taken be entered in the minutes of the meeting, or (iii) the
director causes written notice of his or her dissent or abstention as to any
specific action to be received by the presiding officer or the meeting before
its adjournment or by the corporation promptly after the adjournment of the
meeting. A director may dissent to a specific action at a meeting, while
assenting to others. The right to dissent to a specific action taken at a
meeting of the Board of Directors or a committee of the board shall not be
available to a director who voted in favor of such action.
ARTICLE IV
OFFICERS
Section 4.1 NUMBER. The officers of the corporation shall be a President,
a Secretary, and a Treasurer, each of whom must be a natural person who is
eighteen years or older and shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. Any two or more offices may
be held by the same person.
Section 4.2 ELECTION AND TERM OF OFFICE. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after the
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
practicable. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his or her death or until
he shall resign or shall have been removed in the manner hereinafter provided.
Section 4.3 REMOVAL AND RESIGNATION. Any officer or agent may be
removed by the Board of Directors at any time, with or without cause, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not
of itself create contract rights.
An officer or agent may resign at any time by giving written notice of
resignation to the Secretary of the corporation. The resignation is effective
when the notice is received by the corporation unless the notice specifies a
later effective date.
<PAGE>
Section 4.4 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
Section 4.5 PRESIDENT. The President shall be the chief executive officer
of the corporation and, subject to the control of the Board of Directors,
shall, in general, supervise and control all of the business and affairs of
the corporation. He or she shall, when present, and in the absence of a Chair
of the Board, preside at all meetings of the shareholders and of the Board of
Directors. He or she may sign, with the Secretary or any other proper officer
of the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation and deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be
otherwise signed or executed; and in general shall perform all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time.
Section 4.6 VICE PRESIDENT. If elected or appointed by the Board of
Directors, the Vice President (or in the event there be more than one vice
president, the vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall, in the absence of the President or in the event of his or her
death, inability or refusal to act, perform all duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certificates for shares of the corporation; and shall perform such
other duties as from time to time may be assigned to him by the President or
by the Board of Directors.
Section 4.7 SECRETARY. The Secretary shall: (a) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
Board of Directors, a record of all actions taken by the shareholders or Board
of Directors without a meeting, a record of all actions taken by a committee
of the Board of Directors in place of the Board of Directors on behalf of the
corporation, and a record of all waivers of notice and meetings of
shareholders and of the Board of Directors or any committee thereof (b) ensure
that all notices are duly given in accordance with the provisions of these
Bylaws and as required by law, (c) serve as custodian of the corporate
records
<PAGE>
and of the seal of the corporation and affix the seal to all documents when
authorized by the Board of Directors, (d) keep at the corporation's registered
office or principal place of business a record containing the names and
addresses of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held
by, each shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (e) maintain at the corporation's
principal office the originals or copies of the corporation's Articles of
Incorporation, Bylaws, minutes of all shareholders' meetings and records of
all action taken by shareholders without a meeting for the past three years,
all written communications within the past three years to shareholders as a
group or to the holders of any class or series of shares as a group, a list of
the names and business addresses of the current directors and officers, a copy
of the corporation's most recent corporate report filed with the Secretary of
State, and financial statements showing in reasonable detail the corporation's
assets and liabilities and results of operations for the last three years, (f)
have general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (g) authenticate records of the corporation,
and (h) in general, perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to him by the president
or by the board of the Board of Directors. Assistant Secretaries, if any,
shall have the same duties and powers, subject to supervision by the
Secretary. The directors and/or shareholders may however respectively
designate a person other than the Secretary or Assistant Secretary to keep
the minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in written form
or in any form capable of being converted into written form within a
reasonable time.
Section 4.8 TREASURER. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these Bylaws; and
(c) in general perform all of the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her by
the President or by the Board of Directors.
<PAGE>
Section 4.9 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
The Assistant Secretaries, when authorized by the Board of Directors, may
sign with the Chair or Vice Chair of the Board of Directors or the President
or a Vice President certificates for shares of the corporation the issuance of
which shall have been authorized by a resolution of the Board of Directors. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
Section 4.10 BONDS. If the Board of Directors by resolution shall so
require, any officer or agent of the corporation shall give bond to the
corporation in such amount and with such surety as the Board of Directors may
deem sufficient, conditioned upon the faithful performance of their
respective duties and offices.
Section 4.11 SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 5.1 CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
Section 5.2 LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 5.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
<PAGE>
Section 5.4 DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VI
SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES
Section 6.1 REGULATION. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
Section 6.2 SHARES WITHOUT CERTIFICATES. Unless otherwise provided
by the Articles of Incorporation or these Bylaws, the board of directors may
authorize the issuance of any of its classes or series of shares without
certificates. Such authorization shall not affect shares already represented
by certificates until they are surrendered to the corporation.
Within a reasonable time following the issue or transfer of shares
without certificates, the corporation shall send the shareholder a complete
written statement of the information required on certificates by the Colorado
Business Corporation Act.
Section 6.3 CERTIFICATES FOR SHARES. If shares of the corporation are
represented by certificates, the certificates shall be respectively numbered
serially for each class of shares, or series thereof, as they are issued,
shall be impressed with the corporate seal or a facsimile thereof, and shall
be signed by the Chair or Vice Chair of the Board of Directors or by the
President or a Vice President and by the Treasurer or an Assistant Treasurer
or by the Secretary or an Assistant Secretary; provided that such signatures
may be facsimile if the certificate is countersigned by a transfer agent, or
registered by a registrar other than the corporation itself or its employee.
Each certificate shall state the name of the corporation, the fact that the
corporation is organized or incorporated under the laws of the State of
Colorado, the name of the person to whom issued, the date of issue, the class
(or series of any class), and the number of shares represented thereby. A
statement of the designations, preferences, qualifications, limitations,
restrictions and special or relative rights of the shares of each class shall
be set forth in full or summarized on the face or back of the certificates
which the corporation shall issue, or in lieu thereof, the certificate may set
<PAGE>
forth that such a statement or summary will be furnished to any shareholder
upon request without charge. Each certificate shall be otherwise in such form
as may be prescribed by the Board of Directors and as shall conform to the
rules of any stock exchange on which the shares may be listed.
The corporation shall not issue certificates representing fractional
shares and shall not be obligated to make any transfers creating a fractional
interest in a share of stock. The corporation may, but shall not be obligated
to, issue scrip in lieu of any fractional shares, such scrip to have terms
and conditions specified by the Board of Directors.
Section 6.4 CANCELLATION OF CERTIFICATES. All certificates surrendered
to the corporation for transfer shall be canceled and no new certificates shall
be issued in lieu thereof until the former certificate for a like number of
shares shall have been surrendered and canceled, except as herein provided
with respect to lost, stolen or destroyed certificates.
Section 6.5 LOST, STOLEN OR DESTROYED CERTIFICATES. Any shareholder
claiming that his certificate for shares is lost, stolen or destroyed may make
an affidavit or affirmation of that fact and lodge the same with the Secretary
of the corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation),
a new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
Section 6.6 TRANSFER OF SHARES. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of
the corporation shall be transferable on the books of the corporation by the
holder thereof in person or by his duly authorized attorney, upon the
surrender and cancellation of a certificate or certificates for a like number
of shares. Upon presentation and surrender of a certificate for shares
properly endorsed and payment of all taxes therefor, the transferee shall be
entitled to a new certificate or certificates in lieu thereof. As against the
corporation, a transfer of shares can be made only on the books of the
corporation and in the manner hereinabove provided, and the corporation shall
be entitled to treat the holder of record of any share as the owner thereof
and shall not be bound to recognize any equitable or other claim to or
<PAGE>
interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
statutes of the State of Colorado.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of December
in each calendar year.
ARTICLE VIII
DISTRIBUTIONS
The Board of Directors may from time to time declare, and the corporation
may pay, distributions on its outstanding shares in the manner and upon the
terms and conditions provided by the Colorado Business Corporation Act and
its Articles of Incorporation.
ARTICLE IX
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "CORPORATE SEAL."
The Board of Directors shall have power, to the maximum extent permitted
by the Colorado Business Corporation Act, to make, amend and repeal the Bylaws
of the corporation at any regular or special meeting of the board unless the
shareholders, in making, amending or repealing a particular Bylaw, expressly
provide that the directors may not amend or repeal such Bylaw. The
shareholders also shall have the power to make, amend or repeal the Bylaws of
the corporation at any annual meeting or at any special meeting called for
that purpose.
<PAGE>
AMENDMENTS
ARTICLE XI
EXECUTIVE COMMITTEE
Section 11.1 APPOINTMENT. The Board of Directors by resolution adopted by
a majority of the full Board, may designate two or more of its members to
constitute an Executive Committee. The designation of such Committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 11.2 AUTHORITY. The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority
of the Board of Directors except to the extent, if any, that such authority
shall be limited by the resolution appointing the Executive Committee and
except also that the Executive Committee shall not have the authority of the
Board of Directors in reference to authorizing distributions, filling
vacancies on the Board of Directors, authorizing reacquisition of shares,
authorizing and determining rights for shares, amending the Articles of
Incorporation, adopting a plan of merger or consolidation, recommending to the
shareholders the sale, lease or other disposition of all or substantially all
of the property and assets of the corporation otherwise than in the usual and
regular course of its business, recommending to the shareholders a voluntary
dissolution of the corporation or a revocation thereof, or amending the
Bylaws of the corporation.
Section 11.3 TENURE AND QUALIFICATIONS. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his or her designation and until his or her successor
is designated as a member of the Executive Committee and is elected and
qualified.
Section 11.4 MEETINGS. Regular meetings of the Executive Committee may be
held without notice at such time and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee
may be called by any member thereof upon not less than one day's notice
stating the place, date and hour of the meeting, which notice may be written
or oral, and if mailed, shall be deemed to be delivered when deposited in the
United States mail addressed to the member of the Executive Committee at his
or her business address. Any member of the Executive Committee may waive
notice of any meeting and no notice of any meeting need be given to any
member
<PAGE>
thereof who attends in person. The notice of a meeting of the Executive
Committee need not state the business proposed to be transacted at the
meeting.
Section 11.5 QUORUM. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 11.6 INFORMAL ACTION BY EXECUTIVE COMMITTEE. Any action required
or permitted to be taken by the Executive Committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the Executive Committee entitled to
vote with respect to the subject matter thereof.
Section 11.7 VACANCIES. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 11.8 RESIGNATIONS AND REMOVAL. Any member of the Executive
Committee may be removed at any time with or without cause by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the corporation, and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 11.9 PROCEDURE. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall
not be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information
at the meeting thereof held next after the proceedings shall have been taken.
ARTICLE XII
EMERGENCY BY-LAWS
The Emergency Bylaws provided in this Article XII shall be operative
during any emergency in the conduct of the business of the corporation
resulting from a catastrophic event that prevents the normal functioning of
the offices of the Corporation, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Articles of Incorporation of the
<PAGE>
corporation or in the Colorado Business Corporation Act. To the extent not
inconsistent with the provisions of this Article, the Bylaws provided in the
preceding articles shall remain in effect during such emergency and upon its
termination the Emergency Bylaws shall cease to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer or
director of the corporation. Notice of the time and place of the meeting shall
be given by the person calling the meeting to such of the directors as it may
be feasible to reach by any available means of communication. Such notice
shall be given at such time in advance of the meeting as circumstances permit
in the judgment of the person calling the meeting.
(b) At any such meeting of the Board of Directors, a quorum shall consist
of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such emergency,
may, effective in the emergency, change the principal office or designate
several alternative principal offices or regional offices, or authorize the
officers so to do.
(d) The Board of Directors, either before or during any such emergency,
may provide, and from time to time modify, lines of succession in the event
that during such an emergency any or all officers or agents of the corporation
shall for any reason be rendered incapable of discharging their duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the shareholders, but
no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action taken prior to the time of such repeal or
change. Any amendment of these Emergency Bylaws may make any further or
different provision that may be practical and necessary for the circumstances
of the emergency.
<PAGE>
CERTIFICATE
I hereby certify that the foregoing Amended Bylaws, consisting of
twenty-four (24) pages, including this page, constitute the Bylaws of
ATI NETWORKS, INC., adopted by the Board of Directors of the corporation as
of June 1, 1998.
/s/ Susan Bestor
_______________________________
SUSAN BESTOR,
Secretary
CONSENT OF COUNSEL
I hereby consent to the use of my name as legal counsel in the Annual
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 1997 filed by ATI Networks, Inc.
on Form 10-KSB.
MARK T. THATCHER, P.C.
/S/ Mark T. Thatcher
By:_____________________________
MARK T. THATCHER, President
Newport, RI
June 3, 1998
We hereby consent to the use of our name as auditing firm in the Annual
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 1997 filed by ATI Networks, Inc.
on Form 10-KSB.
/s/ Schenck and Associates
Schenck and Associates
December 31, 1997
Fond du Lac, Wisconsin
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