U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Max Development, Inc.
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(Name of Small Business Issuer in its charter)
Colorado 84-1474940
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6025 South Quebec Street, Suite #150
Englewood, Colorado 80111
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (720) 489-8873
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of class)
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Item 1. Description of Business.
(a) Business Development.
Max Development, Inc. (the "Company" or "MDI"), was organized under the
laws of the State of Colorado on April 23, 1998. The Company's executive offices
are presently located at 6025 South Quebec Street, Suite #150, Englewood,
Colorado 80111, and its telephone and facsimile numbers are (720) 489-8873 and
(720) 489-8874, respectively.
The Company received gross proceeds in the amount of $80,500 from the sale
of a total of 322,000 shares of common stock, $.001 par value per share (the
"Common Stock"), in an offering conducted during the period from January through
June 1999 pursuant to Section 3(b) of the Securities Act of 1933, as amended
(the "Act"), and Rule 504 of Regulation D promulgated thereunder.
On April 21, 1999, the Company acquired an approximate eight percent of the
total number of outstanding shares of common stock of Northern Ventures Ltd.
("NVL"), a British Virgin Islands corporation, in consideration for the sum of
$15,000 in cash. Northern Ventures Ltd. holds, through a wholly-owned Republic
of South Africa ("RSA") corporation, a contract right to mine the admiralty
strip on a marine diamond concession, known as the Brazil Farms concession, in
the Atlantic Ocean off the west coast of the RSA.
(b) Business of Issuer.
General
As of the date hereof, MDI's activities in the mining industry are limited
to its participation in marine diamond mining operations off the west coast of
the Republic of South Africa through the Company's minority ownership interest
in NVL, a British Virgin Islands corporation that is conducting such operations
through a wholly-owned Republic of South Africa corporation. The Company owns of
record and beneficially 182 shares, representing approximately eight percent of
2,370 outstanding shares, of common stock of NVL which it acquired on April 21,
1999, in consideration for the cash sum of $15,000. Northern Ventures SA (Pty)
Ltd. ("NVSA"), the RSA corporation wholly-owned by NVL, holds a contract right
to mine the admiralty strip on the NR 5A marine diamond concession, also known
as the "Brazil Farms" concession, in the Atlantic Ocean off the west coast of
RSA where NVSA's diamond mining operations, partially funded by the Company's
investment in NVL, are presently being conducted. Northern Ventures Ltd., since
1997, raised a total of approximately $119,750 from the sale of its common
stock, including the sum of $15,000 received from the Company, which was used to
complete the acquisition of equipment, hire qualified labor (including divers),
rent a beach facility and pay the operating costs of the trial-run beach
operation involving exploration and limited production activities on the Brazil
Farms concession. The trial-run beach operation, conducted during the period of
approximately seven months from October 7, 1998, through the end of April 1999,
spanned approximately four months more than the three-month period initially
anticipated. The operations of the crew during this period on five separate
locations along the tidal zone of the Brazil Farms concession were required to
be halted periodically because of adverse weather conditions. Nevertheless, such
operations yielded 2,115 bags of gravel weighing 42.3 tons which were processed
on site into 142.81 carats of diamonds. NVL has realized net revenue from
diamond sales to date of $9,854, after operating expenses (not including NVSA's
administrative expenses and equipment costs) aggregating approximately $18,047.
The minimal revenue realized by NVL to date has been attributed by its
management to three factors: (i) the lower than expected quantities of diamonds
per ton of gravel processed; (ii) the smaller size of diamonds (less than one
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carat) than anticipated; and (iii) NVSA's responsibility for payment of a 40%
royalty and 3% marketing fee before payment of all operating expenses. Despite
these factors, the diamonds located to date have been high-grade in quality and
NVL expects to resume mining operations in late September 1999; which operations
were halted after the first season in April 1999 because of the onset of autumn
in the southern hemisphere. Prior to re-commencing mining activities, however,
management intends to review the results of an independent contractor's
activities, including the evaluation of new types of equipment and prospecting
in areas in the tidal zone unfamiliar to NVL, conducted during the autumn season
despite the limitations imposed by the adverse weather and sea conditions.
Northern Ventures Ltd. initially undertook the Brazil project based upon, among
other things, the likelihood, in the assessment of its Board of Directors, that
the Brazil Farms admiralty strip concession contains significant amounts of gem
quality diamonds and upon the independent geological report of Mr. Stuart D.
Lyle, Cape Town, RSA, on the viability of the project. Based upon the foregoing
and the quality of the small quantity of diamonds mined by NVSA to date, Company
management remains hopeful that NVL will realize profits from future operations
from which the Company will benefit as a minority shareholder of NVL via
dividends and/or otherwise.
Mr. David C. Olson, the sole executive officer and director of MDI and
owner of 77.9% of the issued and outstanding shares of the Company's Common
Stock, has no experience in the mining industry in general or specifically, with
respect to diamond mining. Because of this, among other reasons, MDI purchased,
as its initial venture in the mining industry, a minority interest in NVL based
upon management's belief and the recommendations of Mr. Robert A. Hildebrand, a
consultant to MDI and the owner of 8.6% of the Company's issued and outstanding
shares of Common Stock, that NVL is managed by experienced individuals and has
reasonable potential for success in the marine diamond mining venture being
conducted utilizing MDI's and other invested funds. The Company proposes to
participate in one or more mining ventures in addition to its investment in NVL
if it succeeds in raising additional debt and/or equity financing, which is not
assured. For the foreseeable future and until experienced mining personnel join
MDI, if ever, virtually all decisions concerning the Company's participation in
mining opportunities will be made or significantly influenced by Mr. Hildebrand.
Northern Ventures Ltd. This British Virgin Islands corporation, in which
the Company owns approximately eight percent of the outstanding common stock,
has five officers and directors, including (i) Mr. Stephen E. Rounds, a minority
shareholder of the Company; (ii) Mr. Richard D. Robinson; (iii) Mr. Ian L.
Forrest; (iv) Mr. Ian J. ffrench; and (v) Mr. Frank Karefa-Smart. All of the
foregoing serve in the positions of Director of NVL except for Mr. Rounds, who
serves as the Managing Director. Mr. Robinson serves as the Chief Safety
Officer, Engineer and as a director of NVSA, the RSA corporation 100%-owned by
NVL. Set forth below is a brief description of each of these individuals:
Stephen E. Rounds, age 53, a United States citizen resident in Denver,
Colorado, is a corporate and Federal securities attorney licensed in the
United States and Colorado.
Richard D. Robinson, age 50, a United Kingdom citizen experienced in
mining and working with financial institutions, presently serves as a
consultant to a diamond production company in the Ivory Coast.
W. Ian L. Forrest, age 57, a resident of Switzerland and a Scottish
Chartered Accountant, holds management, non-executive and consulting
positions in several European, Canadian and South African corporations,
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including Caledonia Mining, Reunion Mining PLC, Gaelic Rescues and Menora
Resources, which are listed on various exchanges (Dublin, London, Montreal,
Toronto and/or Johannesburg).
Ian J. ffrench, age 55, is a British citizen; resides in Jersey,
Channel Islands, United Kingdom; and holds a Jersey passport. Mr. ffrench,
a Fellow of the Institute of Chartered Accountants in England and Wales and
an Associate of the Society of Trust and Estate Practitioners, is Managing
Director of a Swiss management company located in Geneva, Switzerland.
Frank Karefa-Smart, age 65, a citizen of Sierra Leone, is the
government liaison for Langer International Ltd., a Tel Aviv and Brussels
diamond dealer licensed to deal diamonds in Sierra Leone with offices in
Freetown, Sierra Leone and other African countries.
Ownership. The following table sets forth certain information
regarding the ownership of NVL's common stock as of the date hereof:
Shares Percentage
Name of Shareholder Owned* of Class Consideration
------------------- ------ -------- -------------
Stephen E. Rounds 658 shares 27.8% $15,750
Richard D. Robinson 400 shares 16.9% $7,000, Services
Ian Forrest 300 shares 12.7% $20,000
Ian ffrench 300 shares 12.7% $20,000
Paddington Investments 200 shares 8.4% $20,000
Max Development, Inc. 182 shares 7.7% $15,000
Frank Karefa-Smart 100 shares 4.2% Services
Shalimar Business
Services 100 shares 4.2% $10,000
David C. Olson 60 shares 2.5% $5,000
Jerry W. Keel 50 shares 2.1% $5,000
D. Michael Rounds 20 shares .8% $2,000
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*Represents the number of shares of Common Stock owned of record and
beneficially by each named person or group, expressed as a percentage of
2,370 shares of NVL's common stock issued and outstanding as of the date
hereof.
Description of Common Stock of NVL. All shares of common stock of NVL
are entitled to vote equally at meetings of shareholders. Approval by
holders of a majority of the shares issued and outstanding are required to
elect and remove directors and to approve substantive transactions
involving NVL (such as a sale or merger of the company or its assets, a
recapitalization, joint venture agreements or amendments to the Articles of
Incorporation). Each share of common stock of NVL will be entitled to share
equally in the assets of NVL in the event of liquidation, after payment of
creditors. No sale, encumbrance or other disposition of shares of common
stock of NVL may be made unless the following conditions have been
satisfied: (i) the other (non-transferring) shareholders of NVL must have
been offered the opportunity to purchase the shares from the seller at the
same terms offered by a third party, but have declined such offer; and (ii)
the proposed third party purchaser must be reasonably acceptable to the
holders of 51% of the non-transferring shareholders. Excepted from such
conditions are transfers within a family or by an entity to its beneficial
owners (e.g., a corporation to its shareholders).
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Dividend Policy; Tax Matters. Northern Ventures Ltd. intends to pay
dividends from earnings in U.S. dollars, subject to retention of earnings
for the proposed second phase of operations and to maintenance of a prudent
working capital reserve. The Board of Directors of NVL is presently
evaluating the Republic of South Africa tax regime with respect to the
adoption of measures that would minimize corporate taxes on NVL as a
holding company.
The Brazil Farms Project. The contract right owned by NVSA to mine the
admiralty strip on the Brazil Farms, or NR 5A marine diamond, concession in the
Atlantic Ocean off the west coast of RSA was received by grant from Trans-Hex
Mining Limited ("Trans-Hex"), the owner of the Brazil Farms concession and the
producer of approximately 10% of the annual diamond production of the RSA. The
admiralty strip runs along the entire coast of RSA and is owned by the state
government. Typically, it is used, if at all, for lighthouses, marine
conservation and recreational parks. However, in certain areas, especially the
west coast area, the admiralty strip is leased to private companies as part of
the "A" concession; which A, or shallow water, concession extends into the
Atlantic Ocean to a depth of 132 meters. Within the A concession, the admiralty
strip extends from 100 feet out to sea from the low tide mark, then toward land
(due east) of the high tide mark up to 60 feet above the high tide mark. The
width of the admiralty strip running north and south depends on local terrain,
which may include cliffs or gradual beach. On average, the Brazil admiralty
strip is 180 meters (540 feet) wide.
The initial area mined during NVSA's trial-run beach operation halted in
April 1999, consisted of three gullies at the south end of the Brazil Farms
admiralty strip which have been identified by Trans-Hex as possibly diamond
bearing. Gullies such as these are bedrock features that run along the west
coast from the shore into the ocean. Mining is accomplished by removing the sand
overburden to expose the gravel, which is removed in turn and processed for
diamonds. With the resumption of operations in late September 1999, NVL intends
to focus on other areas along the strip which management anticipates to be
richer and, after payment of the 40% royalty fee to Trans Hex and the 3%
marketing fee will, nevertheless, enable NVSA to break even. NVL intends that
NVSA will conduct exploration and production activities contemporaneously, i.e.,
if an area is productive, it will be mined on a limited basis and targeted for
more intensive work in the second phase, after completion of the exploration of
the Brazil Farms admiralty strip. Management of NVL believes that the
exploration/limited production phase of NVSA's operations may span a period of
three years, assuming encouraging and profitable results of operations. The
initial operations of NVSA conducted from October 7, 1998, through late April
1999 on five separate locations along the tidal zone of the Brazil Farms
concession yielding only 142.81 carats of diamonds smaller in size than expected
are, nevertheless, sufficiently encouraging as to warrant further exploratory
operations because of the high-grade quality of the diamonds, among other
factors.
Gravel recovered by NVSA is processed for diamonds on site and deposited in
a lock box accessible by NVSA and Trans-Hex. Trans-Hex posts a security officer
on site and is responsible for diamond sales throughout the production phase.
Production is divided between NVSA and Trans-Hex on a 60%/40% basis. At the end
of each month, for NVSA's 60%-share of production, Trans-Hex pays NVSA 80% of
the value estimated for each batch of diamonds. The balance of funds owed for
NVSA's share, if any, is paid when Trans-Hex sells the diamonds to the general
diamond market in RSA. The amount of the final payment is adjusted up or down
depending on the actual variance from the initial estimated value. All payments
are made in U.S. dollars.
Expenses for the first phase of the Brazil Farms project over the initial
start-up period are estimated by NVL management not to exceed the sum of
$80,000, including equipment costs, direct operating expenses, geological and
administrative expenses (including travel from the U.S. and the United Kingdom
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to the RSA) and working capital. This first phase of operations will include the
three gullies initially explored and other areas on the Brazil Farms strip which
have been identified as potentially more attractive. If a gully proves to be
promising in the initial stage, operations in the second phase are expected to
encompass excavation of the gully onto land and further out to sea. In this
event, Trans-Hex would be required to give its consent to the Company's
excavating a discovered gully past the land (east) and/or sea (west) boundaries.
Trans-Hex has previously verbally agreed to such seaward (west) extensions
(expected to be reduced to writing in the near future) and similar agreements
for extensions toward land, or east extensions, are expected to be obtained.
Northern Ventures, Ltd., management had estimated that, in order for
operations to be continued past the trial-run beach operation, average daily
recoveries of diamonds would be required to be from 15 to 20 carats. At an
estimated $120 per carat net to NVL for small stones (prices per carat are
higher for larger stones), such production would generate gross revenues of
$39,600 to $52,800, or net revenues (after operating and administrative
expenses) of $25,000 to $38,200, per twenty-two day working month. While the
aforesaid goal has not been achieved to date, NVL management believes that there
is potential for significantly higher recoveries if attractive diamond-bearing
gullies are identified elsewhere on the Brazil Farms strip prior to the second
phase of operations. While cash flow from operations, i.e., payments received
from Trans-Hex, have not been sufficient to generate profits for shareholders or
fund continuing operations in the initial phase and despite inconclusive results
of mining and geological evaluations, management intends to continue first phase
operations in late September 1999. Undertaking the second stage of operations
will depend on the results of the first phase operations; the estimated diamond
reserves in the admiralty strip; whether Trans-Hex will extend NVSA's lease past
the expiration date of March 31, 2000 (although an extension is expected to be
granted in due course); and other factors. Equipment and operating costs for the
second stage of operations are estimated to aggregate approximately $900,000.
Funding for the second phase of operations is expected, although not assured,
from positive cash flow from the first stage of operations, to a limited degree,
and from additional equity and/or debt financing. The Company's investment in
NVL is not without risks, including, among others, the absence of established
diamond reserves and very limited capital for the development-stage operation.
Proposed Participation in Other Mining Opportunities
Depending upon the Company's success in raising equity and/or debt
financing in addition to the amount of $80,500 received from its recently
completed offering of Common Stock pursuant to Rule 504 of Regulation D under
Section 3(b) of the Act, MDI intends to participate in one or more mining
ventures in addition to the Brazil Project. However, unless substantial
additional funding is received, management expects any such opportunities which
may become available to MDI to be limited to partnering, joint venture or
similar such arrangements whereby the Company joins with others having the
mineral reserves and resources in addition to the financing, equipment,
personnel and other resources necessary to conduct mineral exploration,
development and production activities. Management intends to evaluate each of
these prospective projects or proposals that may become available for
participation by the Company on a case-by-case basis. The success of any such
venture participated in by MDI could not be assured. The Company is dependent
upon the efforts of its management and/or consultant, including Messrs. Olson
and Hildebrand, to obtain the sizable amount of capital necessary in order to
acquire mineral reserves and resources and/or mining properties, leases,
interests or contract or other rights and conduct operations in the mining
industry on a commercial scale. Mr. Olson has no previous experience in the
mining business. It is likely that properties, if any, acquired by MDI in the
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future on which funds are spent for exploration may prove worthless and/or
extended periods of time may elapse between the expenditure of funds and the
recognition of income from a property. Furthermore, even assuming the Company's
success in fund-raising such that it obtains the sizable amount of capital
required to successfully develop a mine to the producing stage, such mine may
not produce minerals in sufficient quantity to enable the Company to realize a
profit. Accordingly, no assurance can be given that proven reserves will ever be
obtained or that commercial production will ever be commenced by the Company.
While management intends to take all action necessary to ensure that the
Company does not inadvertently become an "investment company," as that term is
defined under the Investment Company Act of 1940, as amended (the "1940 Act"),
there can be no assurance that MDI can avoid such classification. In general,
investment companies are companies the bulk of whose assets are invested in
securities. The Company's initial venture is the purchase of eight per cent of
the common stock of a British Virgin Islands corporation that conducts diamond
exploration and mining activities. The 1940 Act was adopted to regulate
investment companies because, among other reasons, of the liquidity, and,
therefore, the ease of transfer and liquidation of the securities holdings of
these companies making it possible for unscrupulous managers to easily defraud
investors. The 1940 Act adopts various techniques of regulation, including
disclosure, advisory opinions from the Securities and Exchange Commission (the
"SEC") to the security holders, requirements for approval by a majority of the
voting securities of the investment company, absolute prohibitions on insiders'
dealings with the investment company without an SEC exemption and the imposition
of substantive structure, minimum capital, composition of the board of
directors, terms of the securities issued, consideration to be received by
investment companies for the securities that they issue and various other
provisions, all of which can be waived with or without conditions by an SEC
exemption. Company management believes that MDI will not be classified as an
investment company because it will come within the purview of one or more of a
number of exemptions from the 1940 Act for the reasons, among others, that it is
actively and primarily engaged in non-investment business and that it is small
in size. Nevertheless, there is a risk that MDI will inadvertently become an
investment company, particularly if management is unsuccessful in raising the
capital required to participate in mining operations other than through minority
securities ownership in one or more mining companies.
Competition
The mining industry is intensely competitive. The Company anticipates that
it will be in competition with mining companies of all sizes located both inside
and outside the United States. MDI expects that its opportunities may be limited
by its financial resources and other assets. In this regard, many of the
companies and other organizations with which MDI will be in competition are
established and virtually all such entities have far greater financial
resources, substantially greater experience and larger staffs than the Company.
Additionally, many of such organizations have substantial exploration, mining
and milling capabilities, proven operating histories and long earnings records,
which the Company lacks. MDI expects to face strong competition from both such
well-established companies and small independent companies like itself. The
principal methods of competition in the industry for the acquisition of mineral
properties are the payment of bonus payments at the time of acquisition of
leases, delay rentals, advance royalties, the use of differential royalty rates,
the amount of annual rental payments and stipulations requiring exploration and
production commitments by the lessee. Companies with greater financial
resources, existing staff and labor forces, equipment for exploration, access to
technical data and vast experience will be in a better position than MDI to
compete for such mineral properties. There can be no assurance that any mineral
properties can be acquired by the Company in the future or upon terms acceptable
to management, or that exploratory work conducted by the Company or others would
result in commercially producible minerals. In addition, the Company's
operations may be subject to decline because of generally increasing costs and
expenses of doing business, thus further increasing anticipated competition.
Additionally, it is expected that there may be significant technological
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advances in the future and the Company may not have adequate creative management
and resources to enable it to take advantage of such advances. The effects of
any such technological advances on MDI, therefore, cannot be presently
determined.
Employees and Consultants
The Company has had no employees since its organization. Except for 900,000
shares of the Company's Common Stock issued and sold to Mr. David C. Olson, the
sole executive officer and director of MDI, and a former executive officer and
director of MDI, respectively, in consideration for the payment by each
individual of the sum of $1,250 for legal services performed by Cudd &
Associates on behalf of the Company, MDI's executive officers and directors have
served in those positions without compensation through the date hereof. Mr.
Olson subsequently acquired the 900,000 shares of Common Stock owned by the
former executive officer, director and controlling shareholder of the Company.
It is anticipated that at such time, if ever, as the Company's financial
position permits, assuming that the Company is successful in raising additional
funds through equity and/or debt financing and/or generating a sufficient level
of revenue from operations, Mr. Olson and any other executive officers and/or
directors of MDI will receive reasonable salaries and other appropriate
compensation, such as bonuses, coverage under medical and/or life insurance
benefits plans and participation in stock option and/or other profit sharing or
pension plans, for services as executive officers of the Company and may receive
fees for their attendance at meetings of the Board of Directors of MDI. (See
Item 7. "Certain Relationships and Related Transactions.")
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation
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Since its inception, the Company has conducted no business operations
except for the purchase of an eight per cent equity ownership interest in NVL, a
British Virgin Islands corporation which conducts, through NVSA, a wholly-owned
Republic of South Africa subsidiary, marine diamond mining operations off the
west coast of the RSA. For the period from inception (April 23, 1998) through
May 31, 1999, the Company had no income from operations, operating expenses
aggregating $14,962 and a loss of $15,000 on the write-down of its investment in
NVL because of the speculative nature of the investment and NVSA's recurring
losses. The Company proposes to raise equity and/or debt financing in addition
to the funding in the amount of $80,500 received from its recent offering and
sale of Common Stock pursuant to Rule 504 of Regulation D under Section 3(b) of
the Act. Although management intends to explore all available alternatives for
debt and/or equity financing, including but not limited to private and public
securities offerings, there can be no assurance that additional capital can be
obtained. In the event that only limited additional financing is received, MDI
expects its opportunities in the mining industry to be limited to partnering,
joint venture or similar such arrangements whereby the Company joins with others
having the mineral reserves and resources in addition to the financing,
equipment, personnel and other resources necessary to conduct mineral
exploration, development and production activities. Even if the Company
succeeded in obtaining the level of funding necessary to acquire a mining
property or properties, funds spent for exploration may prove worthless and/or
extended periods of time may elapse between the expenditure of funds and the
recognition of income from a property and, further, a mine successfully
developed to the producing stage may, nevertheless, fail to produce minerals in
sufficient quantity to enable the Company to realize a profit.
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Financial Condition, Capital Resources and Liquidity
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At May 31, 1999, the Company had cash assets totaling $44,025 and $922 in
current liabilities. Since the Company's inception, it has received $80,500 in
cash contributed as consideration for the issuance of shares of Common Stock.
Item 3. Description of Property.
The Company maintains its offices at the business offices located at 6025
South Quebec Street, Suite #150, Englewood, Colorado 80111, of Summit Financial
Relations, Inc. ("Summit"), a company affiliated with MDI of which Mr. David C.
Olson, the sole executive officer and director of the Company, is the President,
a director and a controlling shareholder. The Company pays Summit rent in the
amount of $1,000 per month for the use of the space and, as of the date hereof,
MDI has paid Summit an aggregate of $5,000 in rent during the period from April
1, 1999, through the date hereof. The space currently occupied by the Company is
expected to be adequate to meet MDI's future needs while it is in the
development stage. The Company owns no real property. Its telephone and
facsimile numbers are (720) 489-8873 and (720) 489-8874, respectively.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of September 3, 1999, by each shareholder known
by the Company to be the beneficial owner of more than 5% of its outstanding
shares of Common Stock, each director and all executive officers and directors
as a group. Unless otherwise indicated by footnote, each of the shareholders
named in the table has sole voting and investment power with respect to the
shares of Common Stock beneficially owned.
Shares Percentage
Beneficially of
Beneficial Owner Owned (1) Class (1)
---------------- --------- ---------
David C. Olson (2) 1,808,000 77.9%
6025 South Quebec Street, Suite #150
Englewood, Colorado 80111
Robert A. Hildebrand 200,000 8.6%
405 Detroit Street
Denver, Colorado 80206
All executive officers and directors 1,808,000 77.9%
as a group (one person)
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(1) Represents the number of shares of Common Stock owned of record and
beneficially by each named person or group, expressed as a percentage of
2,322,000 shares of the Company's Common Stock issued and outstanding as of
September 3, 1999.
(2) Sole executive officer and director of the Company.
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
Executive Officers and Directors
Set forth below is the name, age, position with the Company and business
experience of the sole executive officer and director of the Company.
Name Age Position
---- --- --------
David C. Olson(1) 38 President, Chief Executive Officer,
Secretary, Chief Financial Officer
and Director
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*Mr. Olson may be deemed to be a "promoter" and "parent" of the Company, as
those terms are defined under the General Rules and Regulations promulgated
under the Securities Act of 1933, as amended.
Directors hold office until the next annual meeting of the Company's
shareholders and until their respective successors have been elected and
qualify. Officers serve at the pleasure of the Board of Directors. Mr. Olson is
expected to devote such time and effort to the business and affairs of the
Company as may be necessary to perform his responsibilities as the sole
executive officer and director of MDI.
Business Experience
David C. Olson, since August 1997, has served as the President, the Chief
Executive Officer, the Treasurer, a director and a controlling shareholder of
Summit Financial Relations, Inc. ("Summit"), a business finance, consulting and
investor relations firm with offices in the Denver Technological Center,
Englewood, Colorado, founded by him. Also, since August 1997, he has served as
the President, the Chief Executive Officer, the Treasurer, a director and a
controlling shareholder of Associate Capital Consulting, Inc., an Englewood,
Colorado, company also founded by Mr. Olson which is engaged in the business of
investing in private and publicly-held companies and, additionally, performs
financial consulting services. Mr. Olson has, since September 1998, served as
the President, the Treasurer and a director of Easy Web, Inc., Englewood,
Colorado, a privately-held company co-founded by him in September 1998 that is
engaged in the business of selling customized turnkey Internet web sites and
hosting services to businesses in the United States. He has served as a
director, since May 1999, and as the President and the Treasurer, since August
1999, of Mile High Foliage, Inc., Englewood, Colorado, a privately-held
wholesale tree nursery business which he founded in May 1999. Mr. Olson has
served, since June 1999, as a director of ModeVa Profiles Inc., a
privately-held, Boulder, Colorado, manufacturer of building materials. From
January 1993 to May 1997, he held various positions, including Vice President,
Branch Office Manager of Cohig's top producing branch office and National Sales
Manager, for Cohig and Associates, Inc. ("Cohig," now part of EastBrokers
International, Inc.), Englewood, Colorado, a securities broker-dealer having
approximately 265 registered representatives in twenty-three states that
specializes in NASDAQ SmallCap and growth stocks and initial and secondary
public securities offerings. During his tenure at Cohig, Mr. Olson served on the
firm's Corporate Finance Commitment Committee and was involved in public and
private financing involving hundreds of millions of dollars and numerous
companies. From April 1987 to January 1993, he was associated with Kober
Financial Corp. ("Kober"), Denver, Colorado, a regional broker-dealer
specializing in NASDAQ SmallCap and growth securities which was acquired by
Cohig in January 1993. Mr. Olson held a number of positions, including Executive
Vice President, National Sales and Syndication, registered broker and account
10
<PAGE>
executive during the period of his association with Kober. During the period
from 1982 to 1987, he was a registered representative associated with a number
of NASD-member broker-dealers.
Item 6. Executive Compensation
No cash compensation has been awarded to, earned by or paid to any
executive officer or director of the Company for all services rendered in all
capacities to the Company since MDI's inception on April 23, 1998. It is not
anticipated that, for the foreseeable future, Mr. Olson or any other executive
officer or director of MDI will receive any compensation in any form for
services to the Company in the capacities of executive officer and/or director.
On April 28, 1998, the Company issued an aggregate of 900,000 shares of Common
Stock to each of Mr. Olson and a former executive officer and director of the
Company for services rendered in organizing the Company. Mr. Olson acquired the
900,000 shares owned by the former Company officer/director for cash on April
15, 1999. He holds no option to purchase any of the Company's securities. Mr.
Olson plans to devote only such time to the affairs of MDI which he deems
necessary. (See Item 7. "Certain Relationships and Related Transactions.")
Effective November 18, 1998, the Board of Directors and shareholders of the
Company approved the adoption of the 1998-9 Services and Consulting Compensation
Plan (the "Plan"), reserving certain shares of Common Stock for issuance under
the Plan or in connection with the exercise of stock options received by
optionees under the Plan. Except for this Plan described hereinabove and
elsewhere in this Memorandum, the Company does not provide its officers or
employees with pension, stock appreciation rights, long-term incentive or other
plans and has no intention of implementing any such plans for the foreseeable
future. In the future, MDI may offer stock options to prospective employees
and/or consultants; however, no such options have been granted as of the date
hereof. It is possible that in the future the Company may establish various
executive incentive programs and other benefits, including reimbursement for
expenses incurred in connection with the Company's operations, Company
automobiles and life and health insurance, for its executive officers and
directors, but none has yet been granted. The provisions of such plans and
benefits will be at the discretion of MDI's Board of Directors.
Incentive Stock Option Plan
The Board of Directors approved the adoption of the 1998-9 Services and
Consulting Compensation Plan (the "Plan") effective as of November 18, 1998,
reserving an aggregate of 1,000,000 shares of Common Stock for issuance to, or
the exercise of stock options granted to, employees, consultants, and
non-employee members of the Board of Directors of the Company under the Plan.
The purpose of the Plan is to promote the growth and general prosperity of the
Company by permitting the Company to issue shares of Common Stock, and grant
options exercisable to purchase shares of Common Stock, to its employees,
consultants and non-employee members of the Board of Directors.
Pursuant to the Plan, the Company may grant incentive stock options within
the meaning of Section 422A of the Internal Revenue Code of 1986, as amended, to
employees as well as non-qualified stock options to employees, officers,
directors and consultants. The Plan provides for administration by the Board of
Directors of the Company or by a committee of the Board of Directors. The Board
or such committee selects the optionees, authorizes the grant of options and
determines the exercise price of the options. The Board of Directors expects to
administer the plan initially.
The exercise price of each stock option under the Plan must be at least
100% of the fair market value of the shares of Common Stock on the date of grant
as determined by the Board of Directors. Each incentive stock option may be
11
<PAGE>
exercisable for a period, as determined by the Board of Directors, but not in
excess of ten years from the date of grant. The exercise price of all incentive
stock options granted under the Plan to shareholders possessing more than 10% of
the total combined voting power of all classes of stock of the Company must be
less than 110% of the fair market value of the shares of Common Stock on the
date of grant and such options may be exercisable for a period not in excess of
five years from the date of grant. All options granted under the Plan are
non-transferable and may be exercised only by the optionee or the optionee's
estate.
There is no limit on the number of shares with respect to which options may
be granted under the Plan to any participating employee. However, the aggregate
fair market value of shares of Common Stock (determined on the date the option
is granted) with respect to which incentive stock options become exercisable for
the first time by an individual option holder during any calendar year (under
all such plans maintained by the Company) may not exceed $100,000.
Options granted under the Plan may be exercised within twelve months after
the date of an optionee's termination of employment by reason of his death or
disability, or within three months after the date of termination by reason of
retirement or voluntary termination approved by the Board of Directors, but only
to the extent the option was otherwise exercisable on the date of termination.
In the event an optionee's employment is terminated for any reason other than
death, disability, retirement or voluntary termination approved by the Board of
Directors, such optionee's option terminates thirty days after the date of such
termination.
The Plan will terminate on November 18, 2008. The Plan may be amended by
the Board of Directors without shareholder approval, except that no amendment
which increases the maximum aggregate number of shares which may be issued under
the Plan or changes the class of employees who are eligible to participate in
the Plan, can be made without the approval of the shareholders of the Company.
No options have been granted under the Plan as of the date hereof.
Compensation of Directors
Directors of MDI receive no compensation pursuant to any standard
arrangement for their services as directors.
Item 7. Certain Relationships and Related Transactions.
On April 28, 1998, the Company issued and sold 900,000 shares of Common
Stock to Mr. David C. Olson, the sole executive officer and director of MDI and
the record and beneficial owner of a total of 1,808,000 shares, representing
approximately 77.9% of the issued and outstanding shares, of the Company's
Common Stock, in consideration for his payment in the amount of $1,250 for legal
services performed by Cudd & Associates, Denver, Colorado, on behalf of the
Company (approximately $.0014 per share). Cudd & Associates is the law firm
which has passed upon the legality of the Common Stock and certain other matters
in connection with this Form 10-SB Registration Statement. Excepting 8,000
shares of Common Stock purchased by him in the Company's offering of Common
Stock pursuant to Rule 504 of Regulation D under Section 3(b) of the Act, Mr.
Olson acquired the balance of 900,000 shares of Common Stock presently owned of
record and beneficially by him from a former executive officer, director and
controlling shareholder of the Company on April 15, 1999.
The Company leases office space from Summit Financial Relations, Inc., a
company affiliated with MDI, located at the business offices of Summit in
Englewood, Colorado, on a month-to-month basis at a rental rate of $1,000 per
month. Since the Company's inception in April 1998 through the date hereof, MDI
has paid a total of $5,000 in rent to Summit for the lease of this office space.
12
<PAGE>
The Company believes that the terms of this rental arrangement are more
favorable than those that could have been obtained from an unaffiliated third
party for comparable arrangements in the Denver, Colorado, suburban area.
On June 17, 1999, the Company paid a one-time fee in the amount of $2,000
to Associate Capital Consulting, Inc., a company affiliated with MDI, in
consideration for the performance by Associate Capital Consulting, Inc., of
certain financial consulting services for the Company.
From time-to-time since the Company's inception, Mr. David C. Olson, MDI's
sole executive officer and director, and Summit have incurred expenses on behalf
of the Company for which they have subsequently been reimbursed by MDI. Such
expenditures have totaled less than $400 through the date hereof and, as of the
date hereof, all such amounts due to Mr. Olson or Summit from time-to-time have
been reimbursed in full.
Item 8. Description of Securities.
Description of Capital Stock
- ----------------------------
The Company's authorized capital stock consists of 10,000,000 shares of
Common Stock, $.001 par value per share, and 1,000,000 shares of Preferred
Stock, $.01 par value per share.
Description of Common Stock
- ---------------------------
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and nonassessable shares. Cumulative voting in the election of
directors is permitted; however, cumulative voting may occur only if a
shareholder announces his intention to cumulate his votes prior to the voting,
in which case all shareholders may cumulate their votes. In the event of
liquidation of the Company, each shareholder is entitled to receive a
proportionate share of the Company's assets available for distribution to
shareholders after the payment of liabilities and after distribution in full of
preferential amounts, if any, to be distributed to holders of the Preferred
Stock. All shares of the Company's Common Stock issued and outstanding are
fully-paid and nonassessable.
Dividend Policy. Holders of shares of Common Stock are entitled to share
pro rata in dividends and distributions with respect to the Common Stock when,
as and if declared by the Board of Directors out of funds legally available
therefor. The Company has not paid any dividends on its Common Stock and intends
to retain earnings, if any, to finance the development and expansion of its
business. Future dividend policy is subject to the discretion of the Board of
Directors and will depend upon a number of factors, including future earnings,
capital requirements and the financial condition of the Company.
Transfer Agent and Registrar. The Transfer Agent and Registrar for the
Company's Common Stock is Corporate Stock Transfer, Inc., 370 Seventeenth
Street, Suite #2350, Denver, Colorado 80202.
Description of Preferred Stock
- ------------------------------
Shares of Preferred Stock may be issued from time to time in one or more
series as may be determined by the Board of Directors. The voting powers and
preferences, the relative rights of each such series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have preemptive
13
<PAGE>
rights. The Company has no shares of Preferred Stock outstanding, and the Board
of Directors has no plan to issue any shares of Preferred Stock for the
foreseeable future unless the issuance thereof shall be in the best interests of
the Company.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
(a) Market Information.
There has been no established public trading market for the Common Stock
since the Company's inception on April 23, 1998.
(b) Holders.
As of September 3, 1999, the Company had 25 shareholders of record of its
2,322,000 issued and outstanding shares of Common Stock, $.001 par value per
share.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 2. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 3. Changes in and Disagreements with Accountants.
Cordovano & Harvey, P.C., 201 Steele Street, Suite #300, Denver, Colorado
80206, reported upon the Company's financial statements for the period from
inception (April 23, 1998) through December 31, 1998, and has been appointed as
the Company's independent accountant for the fiscal year ending December 31,
1999. There has been no change in the Company's independent accountant during
the period commencing with the Company's retention of Cordovano & Harvey, P.C.,
through the date hereof.
Item 4. Recent Sales of Unregistered Securities.
On April 28, 1998, the Company issued and sold 900,000 shares of Common
Stock, $.001 par value per share (a total of 1,800,000 shares of Common Stock),
to each of Messrs. David C. Olson and C. Edward Venerable in consideration for
the payment in the amount of $1,250 by each individual for legal services
performed on behalf of the Company by Cudd & Associates (a total of $2,500 at
the rate of approximately $.0014 per share). Cudd & Associates, Denver,
Colorado, is the law firm which has passed upon the legality of the Common Stock
and certain other matters in connection with this Form 10-SB Registration
Statement. Mr. Olson serves as the sole executive officer and director of MDI
and owns of record and beneficially an aggregate of 1,800,000 shares,
representing approximately 77.5%, of the issued and outstanding shares, of the
Company's Common Stock. Mr. Venerable served in the positions of Vice President,
Secretary, Chief Financial Officer and director of the Company from the date of
MDI's inception on April 23, 1998, until his resignation from the foregoing
14
<PAGE>
positions on April 15, 1999. On this date, Mr. Olson replaced Mr. Venerable in
the offices of Secretary and Chief Financial Officer of the Company and acquired
all 900,000 shares of Common Stock owned of record and beneficially by Mr.
Venerable. The Company relied, in connection with the sales of the shares, upon
the exemptions from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended (the "1933 Act"), and Section 11-51-308(1)(p) of the
Colorado Securities Act, as amended (the "Colorado Act"). The Company relied
upon the fact that the issuance and sale of the shares by the Company did not
constitute a public securities offering together with the fact that Messrs.
Olson and Venerable were executive officers, directors and controlling
shareholders of MDI at the time of the sales, to make the exemptions available.
During the period from January through June 1999, the Company issued and
sold an aggregate of 322,000 shares of Common Stock to twenty-four persons,
including eighteen residents of the State of Colorado and one resident of each
of the States of California, Florida, Nebraska, Tennessee and Utah, for cash
consideration totaling $80,500. Among the Colorado residents are Mr. David C.
Olson, MDI's sole executive officer and director, and Patricia Cudd, Esq., the
sole proprietor of the law firm which has passed upon the legality of the Common
Stock and certain other matters in connection with this Form 10-SB Registration
Statement. In connection with the sales, the Company relied upon the exemptions
from registration provided under Section 3(b) of the Securities Act of 1933, as
amended (the "Act"), and Rule 504 of Regulation D promulgated thereunder and
Sections 25102(f) of the California Corporations Code, as amended, Section
11-51-308(1)(p) of the Colorado Act, Section 517.061(11)(a) of the Florida
Securities and Investor Protection Act, as amended, Section 8-1111(1) of the
Securities Act of Nebraska, as amended, Section 48-2-103(b)(4) of the Tennessee
Securities Act of 1980, as amended, and Section 61-1-14(2)(q) of the Utah
Uniform Securities Act, as amended. No underwriter was employed in connection
with the offering and sale of the shares. The facts relied upon by the Company
to make the exemptions available include, among others, the following: (i) the
aggregate offering price for the offering of the shares of Common Stock did not
exceed $1,000,000, less the aggregate offering price for all securities sold
within the twelve months before the start of and during the offering of the
shares in reliance on any exemption under Section 3(b) of, or in violation of
Section 5(a) of, the Act; (ii) the required number of manually executed
originals and true copies of Form D, accompanied, in connection with the
Colorado notification of exemption, with the appropriate exemption fee, were
duly and timely filed with the U.S. Securities and Exchange Commission and the
Colorado Division of Securities; (iii) no general solicitation or advertising
was conducted by the Company in connection with the offering of any of the
shares; and (iv) the fact that the Company has not been since its inception (a)
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended; (b) an "investment company" within the meaning
the Investment Company Act of 1940, as amended; or (c) a development stage
company that either has no specific business plan or purpose or has indicated
that its business plan is to engage in a merger or acquisition with an
unidentified company or companies, or other entity or person. (See Part I, Item
7. "Certain Relationships and Related Transactions.")
Item 5. Indemnification of Directors and Officers.
Article VII of the Company's Articles of Incorporation contains provisions
providing for the indemnification of directors and officers of the Company as
follows:
(a) The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is otherwise serving at the request of the corporation as a
15
<PAGE>
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation, 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, conviction 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 he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe the action was unlawful.
(b) The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action or
suit by or in the right of the corporation, to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' 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, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for 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 shall determine upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the officer, director
and employee or agent is proper in the circumstances, because he has met the
applicable standard of conduct set forth in Section (a) or (b) of this Article.
Such determination shall be made (i) 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 (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for such purpose.
(e) Expenses (including attorneys' 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
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
(f) The Board of Directors may exercise the corporation's power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
16
<PAGE>
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Articles of Incorporation, the Bylaws, agreements, vote of
the shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs and
personal representatives of such a person.
The Company has no agreement with Mr. Olson, its sole director and
executive officer, providing for indemnification of Mr. Olson with respect to
liability arising out of his capacity or status as an officer and director.
At present, there is no pending litigation or proceeding involving Mr.
Olson, the sole director and executive officer of the Company, as to which
indemnification is being sought.
PART F/S
The Financial Statements of Max Development, Inc., required by Regulation
SB commence on page F-1 hereof in response to Part F/S of this Registration
Statement on Form 10-SB and are incorporated herein by this reference.
PART III
Item 1. Index to Exhibits.
Item
Number Description
- ------ -----------
3.1* Articles of Incorporation of Max Development, Inc., filed April
23, 1998.
3.2* Articles of Amendment to the Articles of Incorporation of Max
Development, Inc., Inc., filed November 25, 1998.
3.3* Bylaws of Max Development, Inc.
- ------------------
*Filed herewith.
Item 2. Description of Exhibits.
The documents required to be filed as Exhibit Number 2 in Part III of Form
1-A filed as part of this Registration Statement on Form 10-SB are listed in
Item 1 of this Part III above. No documents are required to be filed as Exhibit
Numbers 3, 5, 6 or 7 in Part III of Form 1-A, and the reference to such Exhibit
Numbers is therefore omitted. No additional exhibits are filed hereto.
17
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MAX DEVELOPMENT, INC.
(Registrant)
Date: September 3, 1999 By: /s/ David C. Olson
- ----------------------- ----------------------
David C. Olson, President
18
<PAGE>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
Page
----
Independent auditors' report................................................F-2
Balance sheets, May 31, 1999 and December 31, 1998..........................F-3
Statements of operations, for the five months ended May 31, 1999,
April 23, 1998 (inception) through December 31, 1998 and April 23,
1998 (inception) through May 31, 1999..................................F-4
Statement of shareholders' equity (deficit), for the period
from April 23, 1998 (inception) through May 31, 1999...................F-5
Statements of cash flows, for the five months ended May 31, 1999,
April 23, 1998 (inception) through December 31, 1998 and April 23,
1998 (inception) through May 31, 1999..................................F-6
Notes to financial statements...............................................F-7
F-1
<PAGE>
To the Board of Directors and Shareholders
Max Development, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the balance sheets of Max Development, Inc. (a development stage
company) as of May 31, 1999 and December 31, 1998 and the related statements of
operations, shareholders' equity (deficit) and cash flows for the five months
ended May 31, 1999, from April 23, 1998 (inception) through December 31, 1998
and from April 23, 1998 (inception) through May 31, 1999. 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 Max Development, Inc. as of May
31, 1999 and December 31, 1998 and the results of its operations and cash flows
for the five months ended May 31, 1999, from April 23, 1998 (inception) through
December 31, 1998 and from April 23, 1998 (inception) through May 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note F, the Company's
recurring operating losses and limited cash resources raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note F. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Cordovano and Harvey, P.C.
July 2, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets
May 31, December 31,
1999 1998
---- ----
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash ................................................................. $ 44,025 $ --
-------- --------
TOTAL CURRENT ASSETS 44,025 --
INVESTMENT, less allowance of $15,000 and
$-0-, respectively (Note A) .......................................... -- --
-------- --------
$ 44,025 $ --
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable ..................................................... $ 870 $ --
Due to affiliate (Note B) ............................................ 12 270
Due to officer (Note B) .............................................. 40 40
-------- --------
TOTAL CURRENT LIABILITIES 922 310
-------- --------
SHAREHOLDERS' EQUITY (DEFICIT) (Note C)
Preferred stock, $.01 par value; 1,000,000 shares authorized;
-0- and -0- shares issued and outstanding, respectively ........... -- --
Common stock, $.001 par value; 10,000,000 shares authorized;
2,302,000 and 2,000,000 shares issued and outstanding, respectively 2,302 2,000
Additional paid-in capital ........................................... 70,763 778
Deferred offering costs .............................................. -- (213)
Deficit accumulated during development stage ......................... (29,962) (2,875)
-------- --------
TOTAL SHAREHOLDERS EQUITY (DEFICIT) 43,103 (310)
-------- --------
$ 44,025 $ --
======== ========
See accompanying notes to the financial statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
April 23, April 23,
Five 1998 1998
Months (Inception) (Inception)
Ended Through Through
May 31, December 31, May 31,
1999 1998 1999
---- ---- ----
COSTS AND EXPENSES
<S> <C> <C> <C>
Rent (Note B) .............................. $ 2,000 $ -- $ 2,000
Legal and accounting ....................... 7,000 2,500 9,500
Stock transfer fees ........................ 870 -- 870
Other general and administrative ........... 2,217 375 2,592
----------- ----------- -----------
OPERATING LOSS (12,087) (2,875) (14,962)
NON-OPERATING EXPENSE
Loss on write-down of investment ........... (15,000) -- (15,000)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (27,087) (2,875) (29,962)
INCOME TAXES (Note D) .......................... -- -- --
----------- ----------- -----------
NET LOSS $ (27,087) $ (2,875) $ (29,962)
=========== =========== ===========
Basic loss per common share .................... $ (0.01) $ * $ (0.01)
=========== =========== ===========
Basic weighted average common shares outstanding 2,090,600 2,000,000 2,034,846
=========== =========== ===========
* Less than $.01 per share
See accompanying notes to the financial statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Statement of Shareholders' Equity (Deficit)
April 23, 1998 (inception) through May 31, 1999
Deficit
Accumulated
Preferred Stock Common Stock Additional Deferred During
----------------- ------------------- Paid-in Offering Development
Shares Par Value Shares Par Value Capital Costs Stage Total
------ --------- ------ --------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 23, 1998 (inception) .... -- $ -- -- $ -- $ -- $ -- $ -- $ --
November 18, 1998, shares issued to
officers in exchange for cash
($.00139/share) (Note C) ............ -- -- 1,800,000 1,800 700 -- -- 2,500
November 18, 1998, shares issued to
consultant in exchange for services
($.00139/share) (Note B) ............ -- -- 200,000 200 78 -- -- 278
Deferred offering costs ................ -- -- -- -- -- (213) -- (213)
Net loss, April 23, 1998 (inception)
through December 31, 1998 ........... -- -- -- -- -- -- (2,875) (2,875)
----- ------ --------- ---------- ---------- -------- ---------- --------
BALANCE, DECEMBER 31, 1998 -- -- 2,000,000 2,000 778 (213) (2,875) (310)
April 15, 1999, stock sold through
private offering, less $5,213 of
offering costs ($.25/share) (Note C). -- -- 302,000 302 69,985 213 -- 70,500
Net loss for the five months ended
May 31, 1999 ........................ -- -- -- -- -- -- (27,087) (27,087)
----- ------ --------- ---------- ---------- -------- ---------- --------
BALANCE, MAY 31, 1999 -- $ -- 2,302,000 $ 2,302 $ 70,763 $ -- $ (29,962) $ 43,103
===== ====== ========= ========== ========== ======== ========== ========
See accompanying notes to the financial statements
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
April 23, April 23,
Five 1998 1998
Months (Inception) (Inception)
Ended Through Through
May 31, December 31, May 31,
1999 1998 1999
---- ---- ----
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss ........................................ $(27,087) $ (2,875) $(29,962)
Transactions not requiring cash:
Common stock issued for services (Note B) .... -- 278 278
Loss on write-off of investments ............. 15,000 -- 15,000
Changes in current liabilities:
Accounts payable and accrued expenses ........ 612 310 922
-------- -------- --------
NET CASH (USED IN)
OPERATING ACTIVITIES (11,475) (2,287) (13,762)
-------- -------- --------
INVESTING ACTIVITIES
Purchase of investment (Note A) ................. (15,000) -- (15,000)
-------- -------- --------
NET CASH (USED IN)
INVESTING ACTIVITIES (15,000) -- (15,000)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from sale of common stock .............. 75,500 2,500 78,000
Payments for offering costs ..................... (5,000) (213) (5,213)
-------- -------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 70,500 2,287 72,787
-------- -------- --------
CHANGE IN CASH AND CASH EQUIVALENTS ................. 44,025 -- 44,025
Cash and cash equivalents, beginning of period ...... -- -- --
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......... $ 44,025 $ -- $ 44,025
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest ........................................ $ -- $ -- $ --
======== ======== ========
Income taxes .................................... $ -- $ -- $ --
======== ======== ========
See accompanying notes to the financial statements
F-6
</TABLE>
<PAGE>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
May 31, 1999
Note A: Significant accounting polices and nature of organization
- -----------------------------------------------------------------
Development stage
Max Development, Inc. (the "Company") is in the development stage in accordance
with Statement of Financial Accounting Standards No. 7.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and cash equivalents
Cash consists of federally insured amounts maintained in a checking account at a
bank. For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Investments
Investments are recorded at cost. The Company's investment consists of less than
a twenty-percent ownership in a company whose stock is not publicly traded. The
investment was written down to net realizable value at May 31, 1999.
Fair value of financial instruments
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based on available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts payable, and
other accrued liabilities approximate fair value due to the short-term maturity
of the instruments.
F-7
<PAGE>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
May 31, 1999
Note A: Significant accounting polices and nature of organization continued
- ---------------------------------------------------------------------------
Income taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
Earnings per common share
Effective December 31, 1997, SFAS 128 "Earnings per Share" requires a dual
presentation of earnings per share-basic and diluted. Basic earnings per common
share has been computed based on the weighted average number of common shares
outstanding. Diluted earnings per share reflects the increase in weighted
average common shares outstanding that would result from the assumed exercise of
outstanding stock options. Basic and diluted earnings per share were the same
for all prior periods presented due to the Company's simple capital structure.
Recently issued accounting pronouncements
The Company has adopted the following new accounting pronouncements for the year
ended December 31, 1998. There was no effect on the financial statements
presented from the adoption of the new pronouncements. SFAS No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers. SFAS No. 132,
"Employers' Disclosures about Pensions and Other Post-retirement Benefits,"
requires additional disclosures about pension and other post-retirement benefit
plans, but does not change the measurement or recognition of those plans.
F-8
<PAGE>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
May 31, 1999
Note A: Significant accounting polices and nature of organization continued
- ---------------------------------------------------------------------------
Nature of organization
The Company was organized under the laws of the State of Colorado on April 23,
1998.
As of May 31, 1999, the Company had invested $15,000 in Northern Ventures Ltd.
("NVL"), a British Virgin Islands corporation, which accounted for an eight
percent equity ownership interest. NVL owns 100 percent of Northern Ventures SA
(Pty) Ltd. ("NVSA"), a Republic of South Africa ("RSA") corporation, which holds
a contract right to mine the admiralty strip on a marine diamond mine
concession, known as the Brazil Farms concession, in the Atlantic Ocean off the
west coast of the RSA. Due to the speculative nature of the investment and
recurring losses of NVSA, the investment was written down to a net realizable
value of $-0- at May 31, 1999.
Note B: Related party transactions
- ----------------------------------
The Company leased office space from an affiliate on a month to month basis
during the five months ended May 31, 1999. Rent expense for the period totaled
$2,000.
During the five months ended May 31, 1999, an affiliate incurred expenses on
behalf of the Company totaling $73. The Company repaid $61 and owed $12 at May
31, 1999. The $12 is included in the accompanying balance sheet at May 31, 1999
as due to affiliate.
During the period ended December 31, 1998, an affiliate incurred expenses on
behalf of the Company totaling $270. This amount is included in the accompanying
balance sheet at December 31, 1998 as due to affiliate. The Company repaid the
$270 during the five months ended May 31, 1999.
During the period ended December 31, 1998, an officer paid expenses on behalf of
the Company totaling $40. This amount is included in the accompanying balance
sheets at May 31, 1999 and December 31, 1998 as due to officer.
F-9
<PAGE>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
May 31, 1999
Note C: Shareholders' equity
- ----------------------------
Preferred Stock
The Company is authorized to issue one million shares of $.01 par value
preferred stock, which may be issued in series with such designations,
preferences, stated values, rights, qualifications or limitations as determined
by the Board of Directors.
Common stock sales
- ------------------
During the five months ended May 31, 1999, the Company offered for sale 1,250
units, consisting of 500,000 shares of the Company's $.001 par value common
stock, pursuant to an exemption from registration under Rule 504 of Regulation D
of the Securities Act of 1933, as amended (the "Act"). Units were sold for $100
each, or $.25 per common share. The Company sold 755 units (302,000 common
shares) for net proceeds of $70,287, after deducting offering costs totaling
$5,213.
During the period from April 23, 1998 (inception) through December 31, 1998,
1,800,000 shares of common stock were sold to officers of the Company for $2,500
($.00139 per share). These shares are "restricted securities" and may only be
sold in compliance with Rule 144 of the Act.
During the period from April 23, 1998 (inception) through December 31, 1998,
200,000 shares of common stock were issued to a consultant to the Company in
exchange for services, valued at $278 ($.00125 per share), related to the NVL
investment.
Stock option plan
- -----------------
The Company has adopted a stock compensation plan for the benefit of key
personnel and others providing significant services to the Company. An aggregate
of 1,000,000 shares of common stock has been reserved under the plan. There were
no options granted under this plan as of May 31, 1999.
F-10
<PAGE>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
May 31, 1999
Note D: Income taxes
- --------------------
A reconciliation of the U.S. statutory federal income tax rate to the effective
tax rate is as follows:
<TABLE>
<CAPTION>
April 23, 1998 April 23, 1998
Five Months (Inception) (Inception)
Ended Through Through
May 31, December 31, May 31,
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory graduated rate ..... 15.00% 15.00% 15.00%
State income tax rate,
net of federal benefit .................. 4.04% 4.04% 4.04%
Loss on investment ........................ -10.54% 0.00% 0.00%
Net operating loss for which no tax
benefit is currently available .......... -8.50% -19.04% -19.04%
------ ------ ------
0.00% 0.00% 0.00%
====== ====== ======
</TABLE>
At May 31, 1999, deferred tax assets consisted of a net tax asset of $2,795, due
to operating loss carryforwards of $14,684, which was fully allowed for, in the
valuation allowance of $2,795. The valuation allowance offsets the net deferred
tax asset for which there is no assurance of recovery. The change in the
valuation allowance for the five months ended May 31, 1999 and from April 23,
1998 (inception) through December 31, 1998 totaled $2,301 and $494,
respectively. The current tax benefit also totaled $2,301 and $494 for the five
months ended May 31, 1999 and from April 23, 1998 (inception) through December
31, 1998, respectively. The net operating loss carryforward expires through the
year 2019.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the deferred tax asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax assets is no longer
impaired and the allowance is no longer required.
Note E: Year 2000 compliance
- ----------------------------
The Year 2000 issue (Y2K) is the result of computer programs written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date sensitive software may not recognize a date
using "00" as the year 2000. This could result in system failure or
miscalculations causing disruptions in operations, including the ability to
process transactions, or engage in similar normal business activities. The
Company did not own any computer equipment or software at May 31, 1999.
F-11
<PAGE>
MAX DEVELOPMENT, INC.
---------------------
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
May 31, 1999
Note E: Year 2000 compliance, continued
- ---------------------------------------
The Company cannot determine the extent to which the Company is vulnerable to
third parties' failure to remediate their own Y2K problems. As a result, there
can be no guarantee that the systems of other companies on which the Company's
business relies will be timely converted, or that failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
have a material adverse affect on the Company. In view of the foregoing, there
can be no assurance that the Y2K issue will not have a material adverse effect
on the Company's business.
Note F: Going concern
- ---------------------
As of May 31, 1999, the Company had recurring operating losses and limited cash
resources with which to carry out its proposed business plan, which raises
substantial doubt about its ability to continue as a going concern.
From April 23, 1998 (inception) through May 31, 1999, the Company raised initial
working capital through an offering of its common stock and the sale of common
stock to its officers. This initial working capital is expected to allow the
Company to continue its start-up operations through September 30, 1999. The
Company anticipates conducting debt financings or additional common stock
offerings, which are not yet beyond the planning stages, to fund its proposed
operations. The Company is largely dependent upon the proceeds anticipated to be
received from the proposed debt financings or common stock offerings to carry
out its proposed business plan. The Company's ability to continue as a going
concern is ultimately dependent upon achieving profitable operations. There is
no assurance that the Company will be successful in its efforts to raise
additional proceeds or achieve profitable operations. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
F-12
ARTICLES OF INCORPORATION
OF
MAX DEVELOPMENT, INC.
KNOW ALL MEN BY THESE PRESENTS:
That I, DAVID C. OLSON, desiring to establish a corporation under the name
of MAX DEVELOPMENT, INC., for the purpose of becoming a body corporate under and
by virtue of the laws of the State of Colorado and, in accordance with the
provisions of the laws of said State, do hereby make, execute and acknowledge
this certificate in writing of my intention to become a body corporate, under
and by virtue of said laws.
ARTICLE I
The name of the corporation shall be: MAX DEVELOPMENT, INC.
ARTICLE II
The nature of the business and the objects and purposes to be transacted,
promoted and carried on are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do, and in any
part of the world, viz:
(a) To transact all lawful business for which corporations may be
incorporated pursuant to the Colorado Corporation Code.
(b) To manufacture, purchase or otherwise acquire and to hold, own,
mortgage or otherwise lien, pledge, lease, sell, assign, exchange, transfer
or in any manner dispose of, and to invest, deal and trade in and with
goods, wares, merchandise and personal property of any and every class and
description, within or without the State of Colorado.
(c) To acquire the goodwill, rights and property and to undertake the
whole or any part of the assets and liabilities of any person, firm,
association or corporation; to pay for the same in cash, the stock of the
corporation, bonds or otherwise; to hold or in any manner dispose of the
whole or any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired and to exercise
all the powers necessary or convenient in and about the conduct and
management of such business.
(d) To guarantee, purchase or otherwise acquire, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of shares of the capital
stock, bonds or other evidences of indebtedness created by other
<PAGE>
corporations and, while the holder of such stock, to exercise all the
rights and privileges of ownership, including the right to vote thereon, to
the same extent as natural persons might or could do.
(e) To purchase or otherwise acquire, apply for, register, hold, use,
sell or in any manner dispose of and to grant licenses or other rights in
and in any manner deal with patents, inventions, improvements, processes,
formulas, trademarks, trade names, rights and licenses secured under
letters patent, copyright or otherwise.
(f) To enter into, make and perform contracts of every kind for any
lawful purpose, with any person, firm, association or corporation, town,
city, county, body politic, state, territory, government, colony or
dependency thereof.
(g) To borrow money for any of the purposes of the corporation and to
draw, make, accept, endorse, discount, execute, issue, sell, pledge or
otherwise dispose of promissory notes, drafts, bills of exchange, warrants,
bonds, debentures and other negotiable or non-negotiable, transferable or
nontransferable instruments and evidences of indebtedness, and to secure
the payment thereof and the interest thereon by mortgage or pledge,
conveyance or assignment in trust of the whole or any part of the property
of the corporation at the time owned or thereafter acquired.
(h) To lend money to, or guarantee the obligations of, or to otherwise
assist the directors of the corporation or of any other corporation the
majority of whose voting capital stock is owned by the corporation, upon
the affirmative vote of at least a majority of the outstanding shares
entitled to vote for directors.
(i) To purchase, take, own, hold, deal in, mortgage or otherwise
pledge, and to lease, sell, exchange, convey, transfer or in any manner
whatever dispose of real property, within or without the State of Colorado.
(j) To purchase, hold, sell and transfer the shares of its capital
stock.
(k) To have one or more offices and to conduct any and all operations
and business and to promote its objects, within or without the State of
Colorado, without restrictions as to place or amount.
(l) To do any or all of the things herein set forth as principal,
agent, contractor, trustee, partner or otherwise, alone or in company with
others.
(m) The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed,
shall be in no way limited or restricted by reference to or inference from
the terms of any other clauses or paragraph of these Articles of
Incorporation.
2
<PAGE>
(n) The foregoing shall be constructed both as objects and powers and
the enumeration thereof shall not be held to limit or restrict in any
manner the general powers conferred on this corporation by the laws of the
State of Colorado.
ARTICLE III
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is 11,000,000 of which 1,000,000 shall
be shares of preferred stock, $.01 par value per share, and 10,000,000 shall be
shares of common stock, $.001 par value per share, and the designations,
preferences, limitations and relative rights of the shares of each class shall
be as follows:
(a) Shares of Preferred Stock. The corporation may divide and issue
the shares of preferred stock in series. Shares of preferred stock of each
series, when issued, shall be designated to distinguish them from the
shares of all other series. The Board of Directors is hereby vested with
authority to divide the class of shares of preferred stock into series and
to fix and determine the relative rights and preferences of the shares of
any such series so established to the full extent permitted by these
Articles of Incorporation and the Colorado Corporation Code in respect of
the following:
(i) The number of shares to constitute such series, and the
distinctive designations thereof;
(ii) The rate and preference of dividends, if any, the time of
payment of dividends, whether dividends are cumulative and the date
from which any dividends shall accrue;
(iii) Whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(iv) The amount payable upon shares in event of involuntary
liquidation;
(v) The amount payable upon shares in event of voluntary
liquidation;
(vi) Sinking fund or other provisions, if any, for the redemption
or purchase of shares;
(vii) The terms and conditions upon which shares may be
converted, if the shares of any series are issued with the privilege
of conversion;
(viii) Voting powers, if any; and
3
<PAGE>
(ix) Any other relative rights and preferences of shares of such
series, including, without limitation, any restriction on an increase
in the number of shares of any series theretofore authorized and any
limitation or restriction of rights or powers to which shares of any
future series shall be subject.
(b) Shares of Common Stock. The rights of holders of shares of common
stock to receive dividends or share in the distribution of assets in the
event of liquidation, dissolution or winding up of the affairs of the
corporation shall be subject to the preferences, limitations and relative
rights of the shares of preferred stock fixed in the resolution or
resolutions which may be adopted from time to time by the Board of
Directors of the corporation providing for the issuance of one or more
series of shares of preferred stock.
The capital stock, after the subscription price has been paid in, shall not
be subject to assessment to pay the debts of the corporation. Any stock of the
corporation may be issued for money, property, services rendered, labor done,
cash advances for the corporation or for any other assets of value in accordance
with the action of the Board of Directors, whose judgment as to value received
in return therefor shall be conclusive and said stock when issued shall be
fully-paid and non-assessable.
ARTICLE IV
The corporation shall have perpetual existence.
ARTICLE V
The governing board of this corporation shall be known as the Board of
Directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the Bylaws of this corporation,
provided that the number of directors shall not be reduced to less than three,
unless the outstanding shares of capital stock of the corporation are held by
fewer than three shareholders, in which event the number of directors shall not
be reduced to less than the number of shareholders of the corporation.
The name and post office address of the incorporator is as follows:
David C. Olson 3090 South Jamaica Court, Suite 306
Aurora, Colorado 80014
The name and post office address of the directors comprising the original
Board of Directors of the corporation are as follows:
David C. Olson 3090 South Jamaica Court, Suite 306
Aurora, Colorado 80014
C. Edward Venerable 1422 Delgany Street, Suite 12
Denver, Colorado 80202
4
<PAGE>
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
(a) To manage and govern the corporation by majority vote of members
present at any regular or special meeting at which a quorum shall be
present.
(b) To make, alter, or amend the Bylaws of the corporation at any
regular or special meeting.
(c) To fix the amount to be reserved as working capital over and above
its capital stock paid in.
(d) To authorize and cause to be executed mortgages and liens upon the
real and personal property of this corporation.
(e) To designate one or more committees, each committee to consist of
two or more of the directors of the corporation, which, to the extent
provided by resolution or in the Bylaws of the corporation, shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation. Such committees shall have such
name or names as may be stated in the Bylaws of the corporation or as may
be determined from time to time by resolution adopted by the Board of
Directors.
The Board of Directors shall have power and authority to sell, lease,
exchange or otherwise dispose of all or substantially all of the property and
assets of the corporation, if in the usual and regular course of its business,
upon such terms and conditions as the Board of Directors may determine without
vote or consent of its shareholders.
The Board of Directors shall have power and authority to sell, lease,
exchange or otherwise dispose of all or substantially all the property or assets
of the corporation, including its goodwill, if not in the usual and regular
course of its business, upon such terms and conditions as the Board of Directors
may determine, provided that such sale shall be authorized or ratified by the
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote thereon at a shareholders meeting called for that purpose, or
when authorized or ratified by the written consent of all the shareholders of
the shares entitled to vote thereon.
The Board of Directors shall have the power and authority to merge or
consolidate the corporation upon such terms and conditions as the Board of
Directors may authorize, provided that such merger or consolidation is approved
or ratified by the shares entitled to vote thereon at a shareholders meeting
called for that purpose, or when authorized or ratified by the written consent
of all the shareholders of the shares entitled to vote thereon.
The corporation shall be dissolved upon the affirmative vote of the
shareholders of at least a majority of the shares entitled to vote thereon at a
meeting called for that purpose, or when authorized or ratified by the written
consent of all the shareholders of the shares entitled to vote thereon.
5
<PAGE>
The corporation shall revoke voluntary dissolution proceedings upon the
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote at a meeting called for that purpose, or when authorized or
ratified by the written consent of all the shareholders of the shares entitled
to vote.
ARTICLE VI
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the corporation, and the same are in
furtherance of and not in limitation of the powers conferred by law.
No contract or other transactions of the corporation with any other person,
firm or corporation, or in which this corporation is interested, shall be
affected or invalidated by (a) the fact that any one or more of the directors or
officers of this corporation is interested in or is a director or officer of
such other firm or corporation; or (b) the fact that any director or officer of
this corporation, individually or jointly with others, may be a party to or may
be interested in any such contract or transaction, so long as the contract or
transaction is authorized, approved or ratified at a meeting of the Board of
Directors by sufficient vote thereon by directors not interested therein, to
which such fact or relationship or interest has been disclosed, or so long as
the contract or transaction is fair and reasonable to the corporation. Each
person who may become a director or officer of the corporation is hereby
relieved from any liability that might otherwise arise by reason of his
contracting with the corporation for the benefit of himself or any firm or
corporation in which he may be in any way interested.
The officers, directors and other members of management of this corporation
shall be subject to the doctrine of corporate opportunities only insofar as it
applies to business opportunities in which this corporation has expressed an
interest as determined from time to time by the corporation's Board of Directors
as evidenced by resolutions appearing in the corporation's minutes. When such
areas of interest are delineated, all such business opportunities within such
areas of interest which come to the attention of the officers, directors and
other members of management of this corporation shall be disclosed promptly to
this corporation and made available to it. The Board of Directors may reject any
business opportunity presented to it and thereafter any officer, director or
other member of management may avail himself of such opportunity. Until such
time as this corporation, through its Board of Directors, has designated an area
of interest, the officers, directors and other members of management of this
corporation shall be free to engage in such areas of interest on their own and
the provisions hereof shall not limit the rights of any officer, director or
other member of management of this corporation to continue a business existing
prior to the time that such area of interest is designated by this corporation.
This provision shall not be construed to release any employee of the corporation
(other than an officer, director or member of management) from any duties which
he may have to the corporation.
6
<PAGE>
ARTICLE VII
Each director and officer of the corporation shall be indemnified by the
corporation as follows:
(a) The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is otherwise serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement, actually and reasonably incurred by him in connection
with such action, suit or proceeding, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding, by judgment, order,
settlement, conviction 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 he reasonably believed to be in, or not opposed
to, the best interests of the corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe the action was
unlawful.
(b) The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or
completed action or suit by or in the right of the corporation, to procure
a judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
or suit, if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation, except
that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
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 shall determine upon application that, despite the adjudication
of liability, but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses which
such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections (a) and (b) of this
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Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the officer, director and employee or agent is proper in the
circumstances, because he has met the applicable standard of conduct set
forth in Section (a) or (b) of this Article. Such determination shall be
made (i) 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 (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the affirmative vote of the
holders of a majority of the shares of stock entitled to vote and
represented at a meeting called for such purpose.
(e) Expenses (including attorneys' 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 Section (d) of this Article, upon receipt of an understanding
by or on behalf of the director, officer, employee or agent to repay such
amount, unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this Article.
(f) The Board of Directors may exercise the corporation's power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against 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 this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Articles of Incorporation, the Bylaws, agreements,
vote of the shareholders or disinterested directors, or otherwise, both as
to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit
of the heirs and personal representatives of such a person.
ARTICLE VIII
The initial registered and principal office of said corporation shall be
located at 3090 South Jamaica Court, Suite 306, Aurora, Colorado 80014 and the
initial registered agent of the corporation at such address shall be David C.
Olson.
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Part or all of the business of said corporation may be carried on in the
City of Aurora, or any other place in the State of Colorado or beyond the limits
of the State of Colorado, in other states or territories of the United States
and in foreign countries.
ARTICLE IX
Whenever a compromise or arrangement is proposed by the corporation between
it and its creditors or any class of them, and/or between said corporation and
its shareholders or any class of them, any court of equitable jurisdiction may,
on the application in a summary way by said corporation, or by a majority of its
stock, or on the application of trustees in dissolution, order a meeting of the
creditors or class of creditors and/or of the shareholders or class of
shareholders of said corporation, as the case may be, to be notified in such
manner as the said court decides. If a majority in number, representing at least
three-fourths in amount of the creditors or class of creditors, and/or the
holders of a majority of the stock or class of stock of said corporation, as the
case may be, agree to any compromise or arrangement and/or to any reorganization
of said corporation, as a consequence of such compromise or arrangement, the
said compromise or arrangement and/or the said reorganization shall, if
sanctioned by the court to which the said application has been made, be binding
upon all the creditors or class of creditors, and/or on all the shareholders or
class of shareholders of said corporation, as the case may be, and also on said
corporation.
ARTICLE X
No shareholder in the corporation shall have the preemptive right to
subscribe to any or all additional issues of stock and/or other securities of
any or all classes of this corporation or securities convertible into stock or
carrying stock purchase warrants, options or privileges.
ARTICLE XI
Meetings of shareholders may be held at any time and place as the Bylaws
shall provide. At all meetings of the shareholders, a majority of all shares
entitled to vote shall constitute a quorum.
ARTICLE XII
Cumulative voting shall not be allowed.
ARTICLE XIII
These Articles of Incorporation may be amended by resolution of the Board
of Directors if no shares have been issued, and if shares have been issued, by
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote thereon at a meeting called for that purpose, or, when
authorized, when such action is ratified by the written consent of all the
shareholders of the shares entitled to vote thereon.
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ARTICLE XIV
Whenever the shareholders must approve or authorize any matter, whether now
or hereafter required by the laws of the State of Colorado, the affirmative vote
of a majority of the shares entitled to vote thereon shall be necessary to
constitute such approval or authorization.
IN TESTIMONY WHEREOF, I have hereunto set my hand on this 23rd day of
April, 1998, and, by my signature below, I hereby further consent to my
appointment as the initial registered agent of the corporation.
/s/ David C. Olson
------------------
David C. Olson
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
I, Janet L. Davis, a Notary Public, in and for the said county and state,
hereby certify that there personally appeared before me, David C. Olson, who
being first duly sworn, declared that he is the person who executed the
foregoing document as the incorporator and the initial registered agent of the
corporation, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 23rd day of
April, 1998.
My commission expires: 4-15-2000. /s/ Janet L. Davis
- --------------------------------- ------------------
Janet L. Davis
Notary Public
SEAL
10
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MAX DEVELOPMENT, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is Max Development, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on November 18, 1998, as prescribed by the Colorado Business Corporation
Act, in the manner marked with an X below:
_____ No shares have been issued or Directors Elected - Action by
Incorporators
_____ No shares have been issued but Directors Elected - Action by
Directors
_____ Such amendment was adopted by the board of directors where shares
have been issued.
__X__ Such amendment was adopted by a vote of the shareholders. The
number of shares voted for the amendment was sufficient for
approval.
Article XII of the Articles of Incorporation shall be amended so that, as
amended, Article XII reads in its entirety as follows:
Cumulative voting shall be allowed.
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: None.
If these amendments are to have a delayed effective date, please list that
date: Not applicable.
(Not to exceed ninety (90) days from the date of filing)
MAX DEVELOPMENT, INC.
Dated: November 19, 1998 By: /s/ C. Edward Venerable
---------------------------
C. Edward Venerable, Secretary
BYLAWS
OF
MAX DEVELOPMENT, INC.
ARTICLE I
OFFICES
The registered office of Max Development, Inc. (the "Corporation") shall be
located in the State of Colorado. The Corporation may have its principal office
and such other offices either within or without the State of Colorado as the
Board of Directors of the Corporation (the "Board") may designate or as the
business of the Corporation may require.
The registered office of the Corporation in the Articles of Incorporation
(the "Articles") need not be identical with the principal office.
ARTICLE II
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held each year on a date and at a time and place to be determined by resolution
of the Board, for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the election of directors
shall not be held on the day designated for the annual meeting of the
shareholders, or at any adjournment thereof, the Board shall cause the election
to be held at a special meeting of the shareholders.
Section 2. Special Meetings. Special meetings of the shareholders for any
purpose, unless otherwise provided for by statute, may be called by the
president, the Board or by the president at the request of the holders of not
less than one-tenth of all the shares of the Corporation entitled to vote at the
meeting.
Section 3. Place of Meeting. The Board may designate any place, either
within or without the State of Colorado, as the place of meeting for any annual
or special meeting. If no designation is made, the place of meeting shall be the
registered office of the Corporation in the State of Colorado.
Section 4. Notice of Meeting. Written notice, stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered as the laws of the State of
Colorado shall provide.
Section 5. 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
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board may fix in advance a date (the "Record Date") for any
such determination of shareholders, which date shall be not more than 50 days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If no Record Date is fixed by the Board, the Record
Date for any such purpose shall be ten days before the date of such meeting or
action. The Record Date determined for the purpose of ascertaining the number of
shareholders entitled to notice of or to vote at a meeting may not be less than
ten days prior to the meeting. When a Record Date has been determined for the
purpose of a meeting, the determination shall apply to any adjournment thereof.
<PAGE>
Section 6. Quorum. If less than a quorum of the outstanding shares as
provided for in the Articles are represented at a meeting, such meeting may be
adjourned without further notice for a period which shall not exceed 60 days. At
such adjourned meeting, at which a quorum shall be present, any business may be
transacted which might have been transacted at the original meeting. Once a
quorum is present at a duly organized meeting, the shareholders present may
continue to transact business until adjournment, notwithstanding any departures
of shareholders during the meeting which leave less than a quorum.
Section 7. Voting of Shares. Each outstanding share entitled to vote shall
be entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution, unless otherwise provided in the
proxy. Proxies shall be in such form as shall be required by the Board of
Directors and as set forth in the notice of meeting and/or proxy or information
statement concerning such meeting.
Section 9. Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by agent or proxy as the bylaws of such
corporation may prescribe or, in the absence of such provision, as the Board of
Directors of such corporation may determine as evidenced by a duly certified
copy of either the bylaws or corporate resolution.
Neither treasury shares nor shares held by another corporation, if the
majority of the shares entitled to vote for the election of directors of such
other corporation is held by the Corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any given time.
Shares held by an administrator, executor, guardian or conservator may be
voted by such fiduciary, either in person or by proxy, without a transfer of
such shares into the name of such fiduciary. Shares standing in the name of a
trustee may be voted by such trustee, either in person or by proxy, but no
trustee shall be entitled to vote shares held by a trustee without a transfer of
the shares into such trust.
Shares standing in the name of a receiver may be voted by such receiver and
shares held by or under the control of a receiver may be voted by such receiver,
without the transfer thereof into the name of such receiver if authority so to
do is contained in an appropriate order of the court by which the receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred on the books of the Corporation
into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
Section 10. Action by Consent of all Shareholders. Any action required to
be taken, or which may be taken at a meeting of the shareholders may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such written consent or consents shall be filed with the
minutes of the Corporation. Such action by written consent of all entitled to
vote shall have the same force and effect as a unanimous vote of such
shareholders.
Section 11. Inspectors. The Board may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
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shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the chairman of the
meeting or any shareholder entitled to vote thereat, the inspectors shall make a
report in writing of any challenge, request or matter determined by them and
shall execute a certificate of any fact found by them.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The Board shall have the power to manage the
business and affairs of the Corporation in such manner as it sees fit. In
addition to the powers and authorities expressly conferred upon it, the Board
may do all lawful acts which are not directed to be done by the shareholders by
statute, by the Articles or by these Bylaws.
Section 2. Number, Tenure and Qualifications. The number of directors of
the Corporation shall not be less than one. Each director shall hold office
until the next annual meeting of shareholders and until a successor director has
been elected and qualified, or until the death, resignation or removal of such
director. Directors need not be residents of the State of Nevada or shareholders
of the Corporation.
Section 3. Regular Meetings. A regular meeting of the Board shall be held,
without other notice than this Bylaw, immediately after and at the same place as
the annual meeting of shareholders. The Board 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 4. Special Meetings. Special meetings of the Board may be called by
or at the request of the Chairman of the Board, the Chief Executive Officer or
any two directors. The person or persons authorized to call special meetings of
the Board may fix any place, either within or without the State of Colorado, as
the place for holding any special meeting of the Board called by them.
Section 5. Telephonic Meetings. Members of the Board and committees thereof
may participate and be deemed present at a meeting by means of conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear each other at the same time.
Section 6. Notice. Notice of any special meeting of the Board shall be
given by telephone, telegraph or written notice sent by mail. Notice shall be
delivered at least one day prior to the meeting (five days before the meeting if
the meeting is held outside the State of Colorado) if given by telephone or
telegram or if delivered personally. If notice is given by telegram, such notice
shall be deemed to be delivered when the telegram is delivered by the telegraph
company. Written notice may be delivered by mail to each director at such
director's business or home address and, if mailed, shall be delivered at least
five days prior to the meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed with postage
thereon prepaid. Any director may waive notice of any meeting. The attendance of
a director at a meeting shall constitute a waiver of notice of such meeting,
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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 need be specified in the notice or
waiver of notice of such meeting.
Section 7. Quorum. A majority of the total membership of the Board shall
constitute a quorum for the transaction of business at any meeting of the Board,
but if a quorum shall not be present at any meeting or adjournment thereof, a
majority of the directors present may adjourn the meeting without further
notice.
Section 8. Action by Consent of All Directors. Any action required to be
taken, or which may be taken at a meeting of the Board may be taken without a
meeting, if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof. Such written consent or consents shall be filed with the minutes
of the Corporation. Such action by written consent of all entitled to vote shall
have the same force and effect as a unanimous vote of such directors at a
meeting of directors at which a quorum is present.
Section 9. Manner of Acting. The act of a majority of the directors present
at a meeting at which a quorum is present shall be an act of the Board.
The order of business at any regular or special meeting of the Board shall
be:
1. Record of those present.
2. Secretary's proof of notice of meeting, if notice is not
waived.
3. Reading and disposal of unapproved minutes, if any.
4. Reports of officers, if any.
5. Unfinished business, if any.
6. New business.
7. Adjournment.
Section 10. Vacancies. Any vacancy occurring in the Board by reason of an
increase in the number specified in these Bylaws, or for any other reason, may
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board may remain at the time such meeting
considering filling such vacancies is held.
Section 11. Compensation. By resolution of the Board, the directors may be
paid their expenses, if any, for attendance at each meeting of the Board and may
be paid a fixed sum for attendance at each meeting of the Board and a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor or from
receiving compensation for any extraordinary or unusual services as a director.
Section 12. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless the dissent
of such director shall be entered in the minutes of the meeting, filed in
writing with the person acting as the secretary of the meeting before the
adjournment thereof or forwarded by registered mail to the Secretary of the
Corporation immediately after the meeting. Such right to dissent shall not apply
to a director who voted in favor of such action.
Section 13. Executive or Other Committees. The Board, by resolution adopted
by a majority of the entire Board, may designate among its members an executive
committee and one or more other committees, each of which, to the extent
provided in the resolution, shall have all of the authority of the Board, but no
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such committee shall have the authority of the Board in reference to amending
the Articles, adopting a plan of merger or consolidation, recommending to the
shareholders the sale, lease, exchange 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. The designation of such committees and the delegation
thereto of authority shall not operate to relieve the Board, or any member
thereof, of any responsibility imposed by law.
Any action required to be taken, or which may be taken at a meeting of a
committee designated in accordance with this Section of the Bylaws, may be taken
without a meeting, if a consent in writing setting forth the action so taken
shall be signed by all those entitled to vote with respect to the subject matter
thereof. Such written consent or consents shall be filed with the minutes of the
Corporation. Such action by written consent of all entitled to vote shall have
the same force and effect as a unanimous vote of such persons.
Section 14. Resignation of Officers or Directors. Any director or officer
may resign at any time by submitting a resignation in writing. Such resignation
takes effect from the time of its receipt by the Corporation unless a date or
time is fixed in the resignation, in which case it will take effect from that
time. Acceptance of the resignation shall not be required to make it effective.
Section 15. Notice Requirements for Director Nominations. Any nomination
for election to the Board of Directors by the stockholders otherwise than
pursuant to Board resolution must be submitted to the Corporation's secretary no
later than 25 days and no more than 60 days prior to the meeting of stockholders
at which such nominations are to be submitted. In the event notice of the
meeting at which such nomination is desired to be submitted is not mailed or
otherwise sent to the stockholders of the Corporation at least 30 days prior to
the meeting, the Corporation must receive the notice of intent to nominate no
later than seven days after notice of the meeting is mailed or sent to the
stockholders by the Corporation. Notices to the Corporation's Secretary of
intent to nominate a candidate for election as a director must give the name,
age, business address and principal occupation of such nominee and the number of
shares of stock of the Corporation held by such nominee Within seven days after
filing of the notice, a signed and completed questionnaire relating to the
proposed nominee (which questionnaire will be supplied by the Corporation to the
person submitting the notice) must be filed with the Secretary of the
Corporation. Unless this notice procedure is followed, the chairman of a
stockholders' meeting may declare the nomination defective and it may be
disregarded.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a president, a
secretary and a treasurer, all of whom shall be executive officers and each of
whom shall be elected by the Board, and such other officers as the Board may
designate from time to time. A Chairman of the Board, Vice Chairman of the Board
and one or more Vice Presidents shall be executive officers if the Board so
determines by resolution. Such other officers and assistant officers, as may be
deemed necessary, shall be designated administrative assistant officers and may
be appointed and removed as the Chief Executive Officer decides. Any two or more
offices may be held by the same person, except the offices of President and
Secretary.
Section 2. Election and Term of Office. The executive officers of the
Corporation, to be elected by the Board, shall be elected annually by the Board
at its first meeting held after each annual meeting of the shareholders or at a
convenient time soon thereafter. Each executive officer shall hold office until
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the resignation of such officer or until a successor shall be duly elected and
qualified, until the death of such executive officer, or until removal of such
officer in the manner herein provided.
Section 3. Removal. Any officer or agent elected or appointed by the Board
may be removed by the Board whenever, in its judgment, the best interests of the
Corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any executive office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
for the unexpired portion of the term.
Section 5. The Chairman of the Board. If a Chairman of the Board (the
"Chairman") shall be elected by the Board, the Chairman shall preside at all
meetings of the shareholders and of the Board. The Chairman may sign, with the
officers authorized by the Chief Executive Officer or the Board, certificates
for the shares of the Corporation and shall perform such other duties as from
time to time are assigned by the Chief Executive Officer or the Board. The
Chairman of the Board may be elected as the Chief Executive Officer, in which
case the Chairman shall perform the duties hereinafter set forth in Article IV,
Section 7, of these Bylaws.
Section 6. The President. The President may sign, with the officers
authorized by the Chief Executive Officer or the Board, certificates for shares
of the Corporation and shall perform such other duties as from time to time are
assigned by the Chief Executive Officer or the Board. The President may be
elected as the Chief Execttive Officer of the Corporation, in which case, the
President shall perform the duties hereinafter set forth in Article IV, Section
7, of these Bylaws.
Section 7. The Chief Executive Officer. If no Chairman shall be elected by
the Board, the President shall be the Chief Executive Officer of the
Corporation. If a Chairman is elected by the Board, the Board shall designate,
as between the Chiarman and the President, who shall be the Chief Executive
Officer. The Chief Executive Officer shall be, subject to the control of the
Board, in general charge of the affairs of the Corporation. The Chief Executive
Officer may sign, with the other officers of the Corporation authorized by the
Board, deeds, mortgages, bonds, contracts or other instruments whose execution
the Board has authorized, except in cases where the signing and execution
thereof shall be expressly delegated by the Board or these Bylaws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed.
Section 8. The Vice Chairman of the Board. If a Chairman shall be elected
by the Board, the Board bay also elect a Vice Chairman of the Board (the "Vice
Chairman"). In the absence of the Chairman or in the event of the death or
inability or refusal to act of the Chairman, the Vice Chairman shall perform the
duties of the Chairman and when so acting shall have all of the powers of and be
subject to all of the restrictions upon the Chairman. The Vice Chairman may
sign, with the other officers authorized by the Chief Executive Officer or the
Board, certificates for shares of the Corporation and shall perform such other
duties as from time to time may be assigned by the Chief Executive Officer or
the Board.
Section 9. The Vice President. In the absence of the President or in the
event of the death or inability or refusal to act of the President, the Vice
President shall perform the duties of the President, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President. In the event there is 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 perform
the duties of the President and, when so acting, shall have all the powers of
and shall be subject to all the restrictions upon the President. Any Vice
President may sign, with the other officers authorized by the Chief Executive
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Officer or the Board, certificates for shares of the Corporation and shall
perform such other duties as from time to time may be assigned by the Chief
Executive Officer or the Board.
Section 10. The Secretary. Unless the Board otherwise directs, the
Secretary shall keep the minutes of the shareholders' and directors' meetings in
one or more books provided for that purpose. The Secretary shall also see that
all notices are duly given in accordance with the law and the provisions of the
Bylaws; be custodian of the corporate records and the seal of the Corporation;
affix the seal or direct its affixation to all documents, the execution of which
on behalf of the Corporation is duly authorized; keep a list of the address of
each shareholder; sign, with the other officers authorized by the Chief
Executive Officer or the Board, certificates for shares of the Corporation; have
charge of the stock transfer books of the Corporation and perform all duties
incident to the office of Secretary and such other duties as may be assigned by
the Chief Executive Officer or by the Board.
Section 11. The Treasurer. If required by the Board, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board shall determine. He shall have charge and
custody of and be responsible for all funds and securities of the Corporation,
receive and give receipts for monies due and payable to the Corporation from any
source whatsoever and deposit all such monies in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of the Bylaws. The Treasurer may sign, with the
other officers athorized by the Chief Executive Officer or the Board,
certificates for shares of the Corporation and shall perform all duties incident
to the office of Treasuer and such other duties as from time to time may be
assigned by the Chief Executive Officer or the Board.
Section 12. Assistant Officers. The Chief Executive Officer may appoint
such other officers and agents as may be necessary or desirable for the business
of the Corporation. Such other officers shall include one or more assistant
secretaries and treasurers who shall have the power and authority to act in
place of the officer for whom they are elected or appointed as an assistant in
the event of the officer's inability or unavailability to act in his official
capacity. The assistant secretary or secretaries or assistant treasurer or
treasuers may sign, with the other officers authorized by the Chief Executive
Officer or the Board, certificates for shares of the Corporation. The assistant
treasurer or treasurers shall, if required by the Board, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board shall determine. 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 Chief Executive Officer or the Board.
Section 13. Salaries. The salaries of the executive officers shall be fixed
by the Board and no officer shall be prevented from receiving such salary by
reason of the fact that such officer is also a director of the Corporation. The
salaries of the administrative assistant officers shall be fixed by the Chief
Executive Officer.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board may authorize any officer or officers,
agent or agents, to enter into any contract on behalf of the Corporation and
such authority may be general or confined to specific instances.
Section 2. Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money, notes or other evidence 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.
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Section 3. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Cororation in such
banks, trust companies or other depositories as the Board may select.
ARTICLE VI
CERTIFICATES FOR SECURITIES AND THEIR TRANSFER
Section 1. Certificates for Securities. Certificates representing
securities of the Corporation (the "Securities") shall be in such form as shall
be determined by the Board. To be effective, such certificates for Securities
(the "Certificates") shall be signed by (i) the Chairman or Vice Chairman or by
the President or a Vice President; and (ii) the Secretary or an assistant
Secretary or by the Treasurer or an assistant treasurer of the Corporation. Any
of all of the signatures may be facsimiles if the Certificate is either
countersigned by the transfer agent, or countersigned by the facsimile signature
of the transfer agent and registered by the written signature of an officer of
any company designated by the Board as registrar of transfers so long as that
officer is not an employee of the Corporation.
A Certificate signed or impressed with the facsimile signature of an
officer, who ceases by death, resignation or otherwise to be an officer of the
Corporation before the Certificate is delivered by the Corporation, is valid
though signed by a duly elected, qualified and authorized officer, provided that
such Certificate is countersigned by the signature of the transfer agent or
facsimile signature of the transfer agent of the Corporation and registered as
aforesaid.
All Certificates shall be consecutively numbered or otherwise identified.
Certificates shall state the jurisdiction in which the Corporation is organized,
the name of the person to whom the Securities are issued, the designation of the
series, if any, and the par value of each share represented by the Certificate,
or a statement that the shares are without par value. The name and address of
the person to whom the Securities represented hereby are issued, the number of
Securities, and date of issue, shall be entered on the Security transfer books
of the Corporation. All Certificates surrendered to the Corporation for transfer
shall be cancelled and no new Certificate shall be issued until the former
Certificate for a like number of shares shall have been surrendered and
cancelled, except that, in case of a lost, destroyed or mutilated Certificate, a
new one may be issued therefor upon such terms and indemnity to the Corporation
as the Board may prescribe.
Section 2. Transfer of Securities. Transfers of Securities shall be made
only on the security transfer books of the Corporation by the holder of record
thereof, by the legal representative of the holder who shall furnish proper
evidence of authority to transfer, or by an attorney authorized by a power of
attorney which was duly executed and filed with the Secretary of the Corporation
and a surrender for cancellation of the certificate for such shares. The person
in whose name Securities stand on the books of the Corporation shall be deemed
by the Corporation to be the owner thereof for all purposes.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by resolution of the
Board.
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ARTICLE VIII
DIVIDENDS
The Board may declare, and the Corporation may pay in cash, stock or other
property, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles.
ARTICLE IX
SEAL
The Board shall provide a corporate seal, circular in form, having
inscribed thereon the corporate name, the state of incorporation and the word
"Seal." The seal on Securities, any corporate obligation to pay money or any
other document may be facsimile, or engraved, embossed or printed.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director
of the Corporation under the provisions of these Bylaws or under the provisions
of the Articles or under the provisions of the applicable laws of the State of
Colorado, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before, at or after the time stated therein, shall be
deemed equivalent to the giving of such notice.
ARTICLE XI
INDEMNIFICATION
The Corporation shall have the power to indemnify any director, officer,
employee or agent of the Corporation or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise to the fullest extent
permitted by the laws of the State of Colorado.
ARTICLE XII
AMENDMENTS
These Bylaws may be altered, amended, repealed or replaced by new Bylaws by
the Board at any regular or special meeting of the Board.
ARTICLE XIII
UNIFORMITY OF INTERPRETATION AND SEVERABILITY
These Bylaws shall be so interpreted and construed as to conform to the
Articles and the statutes of the State of Colorado or of any other state in
which conformity may become necessary by reason of the qualification of the
Corporation to do business in such foreign state, and where conflict between
these Bylaws and the Articles or a statute has arisen or shall arise, the Bylaws
shall be considered to be modified to the extent, but only to the extent,
conformity shall require. If any Bylaw provision or its application shall be
deemed invalid by reason of the said nonconformity, the remainder of the Bylaws
shall remain operable in that the provisions set forth in the Bylaws are
severable.
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