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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10SB-12G
General Form For Registration of Securities
of Small Business Issuers
Pursuant to Sections 12(b) and (g) of
the Securities Exchange Act of 1934
GALLAGHER RESEARCH CORPORATION
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(Exact name of Small Business Issuer as specified in its charter)
Nevada 84-0920934
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12373 E. Cornell Avenue, Aurora, Colorado 80014
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(Address of Principal Executive Offices and Zip Code)
303-337-3384
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(Small Business Issuer's telephone number, including area code)
Securities to be registered pursuant to 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 NONE
Securities to be registered pursuant to Section 12(g)of the Act:
COMMON STOCK, $.001 Par Value
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(Title of Class)
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TABLE OF CONTENTS
PART I
Item 1. DESCRIPTION of BUSINESS ......................................... 4
Background.................................................... 4
Forward-Looking Statements.................................... 5
Exchange Act Registration..................................... 5
Proposed Business............................................. 5
Pre-Combination Activities.................................. 6
Combination Suitability Standards........................... 7
Form of Acquisition......................................... 9
Post-Combination Activities................................. 10
Potential Benefits to Insiders................................ 10
Use of Consultants and Finders................................ 10
State Securities Law Considerations........................... 11
No Investment Company Regulation.............................. 11
Competition................................................... 12
Employees..................................................... 12
Item 2. MANAGEMENT'S DISCUSSION and ANALYSIS or PLAN of OPERATION ....... 12
Results of Operations......................................... 12
Liquidity and Capital Resources............................... 12
Year 2000 Issues.............................................. 13
Item 3. DESCRIPTION of PROPERTY.......................................... 13
Item 4. SECURITY OWNERSHIP of CERTAIN
BENEFICIAL OWNERS and MANAGEMENT ............................... 13
Beneficial Ownership.......................................... 14
Changes in Control............................................ 14
Item 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS and CONTROL PERSONS................................... 14
Biographical Information...................................... 15
Prior Experience with Blank Check Companies................... 15
Potential Conflicts of Interest............................... 16
Indemnification of Directors and Officers..................... 17
Exclusion of Director Liability............................... 17
Item 6. EXECUTIVE COMPENSATION .......................................... 17
Cash and Other Compensation................................... 17
Compensation Pursuant to Plans................................ 17
Employee Stock Compensation Plan.............................. 17
Compensatory Stock Option Plan................................ 18
Employment Contracts.......................................... 18
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Item 7. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS .................. 18
Item 8. DESCRIPTION of SECURITIES ....................................... 18
Common Stock.................................................. 18
Preferred Stock............................................... 19
Annual Reports................................................ 19
Transfer Agent................................................ 19
PART II
Item 1. MARKET PRICE of and DIVIDENDS on the REGISTRANT'S COMMON
EQUITY and OTHER SHAREHOLDER MATTERS ........................... 20
Price Range of the Common Stock............................... 20
Dividends..................................................... 20
Shareholders ................................................. 20
Public Market for the Common Shares........................... 20
Item 2. LEGAL PROCEEDINGS................................................ 20
Item 3. CHANGES in and DISAGREEMENTS with ACCOUNTANTS
on ACCOUNTING and FINANCIAL DISCLOSURE ......................... 21
Item 4. RECENT SALES of UNREGISTERED SECURITIES ......................... 21
Item 5. INDEMNIFICATION of DIRECTORS and OFFICERS ....................... 21
PART F/S
FINANCIAL STATEMENTS ............................................ 21
PART III
Item 1. LIST of EXHIBITS................................................. 22
SIGNATURES....................................................... 23
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PART I
ITEM 1. DESCRIPTION of BUSINESS.
BACKGROUND
Gallagher Research Corporation ("GRC" or "Company") was incorporated on
April 2, 1999, for the purpose of entering into a merger with and
reincorporating its predecessor, Gallagher Research and Development Company
("Gallagher Colorado"), a Colorado corporation organized on July 27, 1983 under
the name Gallagher Research and Development Company, Inc. On December 10, 1997,
Gallagher Colorado changed its name to Gallagher Research and Development
Company, dropping the "Inc." from the name. Effective April 6, 1999 Gallagher
Colorado was merged with and into GRC in a statutory merger (the
"Reincorporation Merger "). At the effective time of the Reincorporation Merger,
each share of Gallagher Colorado's common stock issued and outstanding
immediately prior to the Merger was as result of the Merger changed into one (1)
share of GRC's common stock. Because the Reincorporation Merger was consummated
for the sole purpose of changing Gallagher Colorado's domicile from Colorado to
Nevada, management believes that it did not constitute a "sale" within the
meaning of Section 5 of the Securities Act of 1933, as amended. The
Reincorporation Merger was effected due to management's belief that Nevada law
is more advantageous to a corporation than Colorado law. There was no change of
control or ownership or control in relation to the Reincorporation Merger.
On January 21, 1998, MNS Eagle Equity Group V, Inc. ("MNS"), a Nevada
corporation, was merged with and into Gallagher Colorado (the "1998 Merger"),
and the 682,500 issued and outstanding common shares of MNS were on the
effective date of the 1998 Merger converted into 273,000 fully paid and
nonassessable shares of Gallagher Colorado's $.0001 par value common stock.
On June 8, 1998, Gallagher Colorado transferred its assets to GRDC, Inc., a
Colorado corporation wholly owned by Gallagher Colorado, pursuant to an
Assignment and Indemnity Agreement of the same date. Under that agreement, GRDC
assumed all liabilities of Gallagher Colorado and also agreed to indemnify
Gallagher Colorado from and against all such liabilities. Pursuant to an October
9, 1998 Stock Exchange Agreement among Gallagher Colorado, GRDC, Inc. and
certain shareholders of Gallagher Colorado (the "Shareholders"), the
Shareholders transferred to Gallagher Colorado a total of 1,175,000 of the
1,200,000 shares of Gallagher Colorado owned by them in exchange for all the
issued and outstanding shares of GRDC. On October 28, 1998 Gallagher Colorado's
shareholders approved the consummation of the Stock Exchange Agreement at a
special shareholders' meeting.
Gallagher Colorado prior to the October 1998 Stock Exchange Agreement, was
an independent oil and gas service firm that provided geological, geophysical
and geochemical consulting services. Gallagher Colorado has performed consulting
projects in every major producing area within the United States and most of
Canada. Gallagher Colorado has also completed projects in Australia and
Pakistan. The principal reason Gallagher Colorado entered into a merger with MNS
was to allow Gallagher Colorado to become publicly held and thus have the
ability to raise capital and create liquidity in its common stock. Due to the
volatility of the stock markets, Gallagher Colorado was not able to raise
capital as a public company. Because of its long operating history prior to the
Reincorporation Merger, GRC is out of the development stage.
On October 30, 1998, Gallagher Colorado determined upon a new business plan
to either acquire a small to medium-size business (or its assets) actively
engaged in a business generating revenues or having immediate prospects of
generating revenues, or to originate a business.
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GRC owns no real estate and has had no full time employees since October
30, 1998. GRC has not had any operations since October 30, 1998 and will not
have any operations of its own unless and until it engages in one or more of the
activities described below under this ITEM 1. GRC is a "blank check" company
which intends to enter into a business combination with one or more as yet
unidentified privately held businesses.
Effective April 16, 1999, GRC forward-split its common stock outstanding
sixteen to one (16:1). There are now 4,768,000 common shares of GRC outstanding
as of the date of this Registration Statement.
FORWARD-LOOKING STATEMENTS
This Registration Statement contains certain forward-looking statements and
information relating to GRC that is based on the beliefs of its management as
well as assumptions made by and information currently available to its
management. When used in this report, the words "anticipate", "believe",
"estimate", "expect", "intend", "plan" and similar expressions, as they relate
to GRC or its management, are intended to identify forward-looking statements.
These statements reflect management's current view of GRC concerning future
events and are subject to certain risks, uncertainties and assumptions,
including among many others: a general economic downturn; a downturn in the
securities markets; a general lack of interest for any reason in going public by
means of transactions involving public blank check companies; federal or state
laws or regulations having an adverse effect on blank check companies,
Securities and Exchange Commission regulations which affect trading in the
securities of "penny stocks," and other risks and uncertainties.
Should any of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this report as anticipated, estimated or expected. Readers
should realize that GRC has only very limited assets, and that for GRC to
succeed requires that it either originate a successful business (for which it
lacks the funds) or acquire a successful business. GRC's realization of its
business aims as stated herein will depend in the near future principally on the
successful completion of its acquisition of a business, as discussed below.
EXCHANGE ACT REGISTRATION
GRC has voluntarily filed this registration statement on Form 10-SB with
the Securities and Exchange Commission ("SEC" or "Commission") in order to
register GRC's common stock under Section 12(g) of the Securities Exchange Act
of 1934, as amended ("Exchange Act"). Upon effectiveness of this registration
statement, GRC will be required to file quarterly, annual and other reports and
other information with the SEC as required by the Exchange Act. Management
believes it is in the shareholders' best interests for GRC to register under the
Exchange Act, in order that GRC's common stock can continue to be quoted on the
OTC Bulletin Board. Additionally, management believes that potential combination
candidates will find GRC more attractive as a public blank check company if it
is subject to Exchange Act reporting requirements and files annual and quarterly
financial statements with the SEC. If GRC's duty to file reports under the
Exchange Act is suspended, GRC intends to nonetheless continue filing reports on
a voluntary basis.
PROPOSED BUSINESS
GRC intends to enter into a business combination with one or more as yet
unidentified privately held businesses. Management believes that GRC will be
attractive to privately held companies interested in becoming publicly traded by
means of a business combination with GRC, without offering their own securities
to the public. GRC intends to pursue negotiations with qualified candidates
after effectiveness of this Registration Statement. GRC will not be restricted
in its search for business combination candidates to any particular geographical
area, industry or industry segment, and may enter into a combination with a
private business engaged in any line of business. Management's discretion is, as
a practical matter, unlimited in the selection of a combination candidate. GRC
has not entered into any agreement, arrangement or understanding of any kind
with any person regarding a business combination. GRC does not intend to enter
into any business combination involving any business or venture with which its
sole officer or director is affiliated.
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Depending upon the nature of the transaction, the current officers and
directors of GRC probably will resign their directorship and officer positions
with GRC in connection with GRC's consummation of a business combination. See
"Form of Acquisition" below. GRC's current management will not have any control
over the conduct of GRC's business following GRC's completion of a business
combination.
It is anticipated that business opportunities will come to GRC's attention
from various sources, including its management, its other stockholders,
professional advisors such as attorneys and accountants, securities
broker-dealers, venture capitalists, members of the financial community, and
others who may present unsolicited proposals. GRC has no plans, understandings,
agreements, or commitments with any individual or entity to act as a finder of
or as a business consultant in regard to any business opportunities for GRC.
There are no plans to use advertisements, notices or any general solicitation in
the search for combination candidates.
PRE-COMBINATION ACTIVITIES. GRC is a "blank check" company, defined as an
inactive, publicly quoted company with nominal assets and liabilities. With
these characteristics, management believes that GRC will be attractive to
privately held companies interested in becoming publicly traded by means of a
business combination with GRC, without offering their own securities to the
public. GRC intends to pursue negotiations with qualified candidates after
effectiveness of this Registration Statement and become publicly quoted.
The term "business combination" (or "combination") means the result of (i)
a statutory merger of a combination candidate into or its consolidation with GRC
or a wholly owned subsidiary of GRC formed for the purpose of the merger or
consolidation, (ii) the exchange of securities of GRC for the assets or
outstanding equity securities of a privately held business, or (iii) the sale of
securities by GRC for cash or other value to a business entity or individual,
and similar transactions. A combination may be structured in one of the
foregoing ways or in any other form which will result in the combined entity
being a publicly held corporation. It is unlikely that any proposed combination
will be submitted for the approval of GRC's shareholders prior to consummation.
Pending negotiation and consummation of a combination, GRC anticipates that it
will have no business activities or sources of revenues and will incur no
significant expenses or liabilities other than expenses related to this
Registration Statement, related to ongoing filings required by the Exchange Act,
or related to the negotiation and consummation of a combination.
The Company anticipates that the business opportunities presented to it
will (1) be recently organized with no operating history, or a history of losses
attributable to under-capitalization or other factors; (2) be experiencing
financial or operating difficulties; (3) be in need of funds to develop a new
product or service or to expand into a new market; (4) be relying upon an
untested product or marketing concept; or (5) have a combination of the
foregoing characteristics. Given the above factors, it should be expected that
any acquisition candidate may have a history of losses or low profitability.
GRC will not be restricted in its search for business combination
candidates to any particular geographical area, industry or industry segment,
and may enter into a combination with a private business engaged in any line of
business, including service, finance, mining, manufacturing, real estate, oil
and gas, distribution, transportation, medical, communications, high technology,
biotechnology or any other. Management's discretion is, as a practical matter,
unlimited in the selection of a combination candidate. Management of GRC will
seek combination candidates in the United States and other countries, as
available time permits, through existing associations and by word of mouth.
GRC has not entered into any agreement or understanding of any kind with
any person regarding a business combination. There is no assurance that GRC will
be successful in locating a suitable combination candidate or in concluding a
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business combination on terms acceptable to GRC. GRC's Board of Directors has
not established a time limitation by which it must consummate a suitable
combination; however, if GRC is unable to consummate a suitable combination
within a reasonable period, such period to be determined at the discretion of
GRC's Board of Directors, the Board of Directors will probably recommend its
liquidation and dissolution. It is anticipated that GRC will not be able to
diversify, but will essentially be limited to one such venture because of GRC's
lack of capital. This lack of diversification will not permit GRC to offset
potential losses from one acquisition against profits from another, and should
be considered an adverse factor affecting any decision to purchase GRC's
securities.
GRC's management has the authority and discretion to effect transactions
having a potentially adverse impact upon GRC's shareholders and to complete a
combination without submitting any proposal to the stockholders for their prior
approval. GRC's shareholders should not anticipate that they will have any
meaningful opportunity to consider or vote upon any candidate selected by GRC
management for acquisition. However, it is anticipated that GRC's shareholders
will, prior to completion of any combination, be given information about the
candidate company's business, financial condition, management and other
information required by ITEMs 6(a), (d), (e), 7 and 8 of Schedule 14A of
Regulation 14A under the Exchange Act.
COMBINATION SUITABILITY STANDARDS. The analysis of candidate companies will
be undertaken by or under the supervision of GRC's President, who is not a
professional business analyst. See "MANAGEMENT" below.
To a large extent, a decision to participate in a specific combination may
be made upon management's analysis of the quality of the candidate company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the candidate will derive from becoming a publicly held entity, and numerous
other factors which are difficult, if not impossible, to objectively quantify or
analyze. In many instances, it is anticipated that the historical operations of
a specific candidate may not necessarily be indicative of the potential for the
future because of the possible need to shift marketing approaches substantially,
expand significantly, change product emphasis, change or substantially augment
management, or make other changes. GRC will be dependent upon the owners and
management of a candidate to identify any such problems which may exist and to
implement, or be primarily responsible for the implementation of, required
changes. Because GRC may participate in a business combination with a newly
organized candidate or with a candidate which is entering a new phase of growth,
it should be emphasized that GRC will incur further risks, because management in
many instances will not have proved its abilities or effectiveness, the eventual
market for the candidate's products or services will likely not be established,
and the candidate may not be profitable when acquired.
Otherwise, GRC anticipates that it may consider, among other things, the
following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
2. GRC's perception of how any particular candidate will be received by
the investment community and by GRC's stockholders;
3. Whether, following the business combination, the financial condition
of the candidate would be, or would have a significant prospect in the
foreseeable future of becoming sufficient to enable the securities of
GRC to qualify for listing on an exchange or on NASDAQ, so as to
permit the trading of such securities to be exempt from the
requirements of the federal "penny stock" rules adopted by the SEC.
4. Capital requirements and anticipated availability of required funds,
to be provided by GRC or from operations, through the sale of
additional securities, through joint ventures or similar arrangements,
or from other sources;
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5. The extent to which the candidate can be advanced;
6. Competitive position as compared to other companies of similar size
and experience within the industry segment as well as within the
industry as a whole;
7. Strength and diversity of existing management, or management prospects
that are scheduled for recruitment;
8. The cost of participation by GRC as compared to the perceived tangible
and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required
items.
No one of the factors described above will be controlling in the selection
of a candidate. Potentially available candidates may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. It should be recognized that, because of GRC's
limited capital available for investigation and management's limited experience
in business analysis, GRC may not discover or adequately evaluate adverse facts
about the opportunity to be acquired. GRC cannot predict when it may participate
in a business combination. It expects, however, that the analysis of specific
proposals and the selection of a candidate may take several months or more.
Management believes that various types of potential merger or acquisition
candidates might find a business combination with GRC to be attractive. These
include acquisition candidates desiring to create a public market for their
shares in order to enhance liquidity for current shareholders, acquisition
candidates which have long-term plans for raising capital through the public
sale of securities and believe that the possible prior existence of a public
market for their securities would be beneficial, and acquisition candidates
which plan to acquire additional assets through issuance of securities rather
than for cash, and believe that the possibility of development of a public
market for their securities will be of assistance in that process. Acquisition
candidates which have a need for an immediate cash infusion are not likely to
find a potential business combination with GRC to be an attractive alternative.
Prior to consummation of any combination (other than a mere sale by GRC
insiders of a controlling interest in GRC's common stock) GRC intends to require
that the combination candidate provide GRC the financial statements required by
ITEM 310 of Regulation S-B, including at the least an audited balance sheet as
of the most recent fiscal year end and statements of operations, changes in
stockholders' equity and cash flows for the two most recent fiscal years,
audited by certified public accountants acceptable to GRC's management, and the
necessary unaudited interim financial statements. Such financial statements must
be adequate to satisfy GRC's reporting obligations under Section 15(d) or 13 of
the Exchange Act. If the required audited financial statements are not available
at the time of closing, GRC management must reasonably believe that the audit
can be obtained in less than 60 days. This requirement to provide audited
financial statements may significantly narrow the pool of potential combination
candidates available, since most private companies are not already audited. Some
private companies will either not be able to obtain an audit or will find the
audit process too expensive. In addition, some private companies on closer
examination may find the entire process of being a reporting company after a
combination with GRC too burdensome and expensive in light of the perceived
potential benefits from a combination.
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FORM OF ACQUISITION. It is impossible to predict the manner in which GRC
may participate in a business opportunity. Specific business opportunities will
be reviewed as well as the respective needs and desires of GRC and the promoters
of the opportunity and, upon the basis of that review and the relative
negotiating strength of GRC and such promoters, the legal structure or method
deemed by management to be suitable will be selected. Such structure may
include, but is not limited to leases, purchase and sale agreements, licenses,
joint ventures and other contractual arrangements. GRC may act directly or
indirectly through an interest in a partnership, corporation or other form of
organization. Implementing such structure may require the merger, consolidation
or reorganization of GRC with other corporations or forms of business
organization, and although it is likely, there is no assurance that GRC would be
the surviving entity. In addition, the present management and stockholders of
GRC most likely will not have control of a majority of the voting shares of GRC
following a reorganization transaction. As part of such a transaction, GRC's
existing directors may resign and new directors may be appointed without any
vote or opportunity for approval by GRC's shareholders.
It is likely that GRC will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of GRC.
Although the terms of any such transaction cannot be predicted, it should be
noted that in certain circumstances the criteria for determining whether or not
an acquisition is a so-called "tax free" reorganization under the Internal
Revenue Code of 1986, depends upon the issuance to the stockholders of the
acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, GRC's
current stockholders would retain in the aggregate 20% or less of the total
issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of GRC prior to such
reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in GRC by the current officers, directors and principal shareholders.
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, GRC may
agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in GRC's securities may have a depressive
effect upon such market.
GRC will participate in a business opportunity only after the negotiation
and execution of a written agreement. Although the terms of such agreement
cannot be predicted, generally such an agreement would require specific
representations and warranties by all of the parties thereto, specify certain
events of default, detail the terms of closing and the conditions which must be
satisfied by each of the parties thereto prior to such closing, outline the
manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, GRC anticipates that it, and/or its officers and
principal shareholders will enter into a letter of intent with the management,
principals or owners of a prospective business opportunity prior to signing a
binding agreement. Such a letter of intent will set forth the terms of the
proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither GRC nor any of the other
parties to the letter of intent will be bound to consummate the acquisition
unless and until a definitive agreement concerning the acquisition as described
in the preceding paragraph is executed. Even after a definitive agreement is
executed, it is possible that the acquisition would not be consummated should
any party elect to exercise any right provided in the agreement to terminate it
on specified grounds.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
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attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of GRC to pay until an indeterminate future time may make it
impossible to procure goods and services.
POST-COMBINATION ACTIVITIES. Management anticipates that, following
consummation of a combination, control of GRC will change as a result of the
issuance of additional Common Stock to the shareholders of the business acquired
in the combination. Once ownership control has changed, it is likely that the
new controlling shareholders will call a meeting for the purpose of replacing
the incumbent directors of GRC with candidates of their own, and that the new
directors will then replace the incumbent officers with their own nominees. Rule
14f-1 under the Exchange Act requires that, if in connection with a business
combination or sale of control of GRC there should arise any arrangement or
understanding for a change in a majority of GRC's directors and the change in
the board of directors is not approved in advance by GRC's shareholders at a
shareholder meeting, then none of the new directors may take office until at
least ten (10) days after an information statement has been filed with the
Securities and Exchange Commission and sent to GRC's shareholders. The
information statement furnished must as a practical matter include the
information required by ITEMs 6(a), (d) and (e), 7 and 8 of Schedule 14A of
Regulation 14A in a proxy statement.
Following consummation of a combination, management anticipates that GRC
will file a current report on Form 8-K with the Commission which discloses among
other things the date and manner of the combination, material terms of the
definitive agreement, the assets and consideration involved, the identity of the
person or persons from whom the assets or other property was acquired, changes
in management and biographies of the new directors and executive officers,
identity of principal shareholders following the combination, and contains the
required financial statements. The Form 8-K report also will be required to
include all information as to the business acquired called for by ITEM 101 of
Regulation S-B.
POTENTIAL BENEFITS to INSIDERS
In connection with a business combination, it is possible that shares of
common stock constituting control of GRC may be purchased from the current
principal shareholders ("insiders") of GRC by the acquiring entity or its
affiliates. If stock is purchased from the insiders, the transaction is very
likely to result in substantial gains to them relative to the price they
originally paid for the stock. In GRC's judgment, none of its officers and
directors would as a result of such a sale become an "underwriter" within the
meaning of the Section 2(11) of the Securities Act of 1933, as amended. No bylaw
or charter provision GRC prevents insiders from negotiating or consummating such
a sale of their shares. The sale of a controlling interest by GRC insiders could
occur at a time when the other shareholders of the Company remain subject to
restrictions on the transfer of their shares, and it is unlikely that GRC
shareholders generally will be given the opportunity to participate in any such
sale of shares. Moreover, GRC shareholders probably will not be afforded any
opportunity to review or approve any such buyout of shares held by an officer,
director or other affiliate, should such a buyout occur.
GRC may require that a company being acquired repay all advances made to
GRC by GRC shareholders and management, at or prior to closing of a combination.
Otherwise, there are no conditions that any combination or combination candidate
must meet, such as buying stock from GRC insiders or paying compensation to any
GRC officer, director or shareholder or their respective affiliates.
USE OF CONSULTANTS and FINDERS
Although there are no current plans to do so, GRC management might hire and
pay an outside consultant to assist in the investigation and selection of
candidates, and might pay a finder's fee to a person who introduces a candidate
with which GRC completes a combination. Since GRC management has no current
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plans to use any outside consultants or finders to assist in the investigation
and selection of candidates, no policies have been adopted regarding use of
consultants or finders, the criteria to be used in selecting such consultants or
finders, the services to be provided, the term of service, or the structure or
amount of fees that may be paid to them. However, because of the limited
resources of GRC, it is likely that any such fee GRC agrees to pay would be paid
in stock and not in cash. GRC has had no discussions, and has entered into no
arrangements or understandings, with any consultant or finder. GRC's officers
and directors have not in the past used any particular consultant or finder on a
regular basis and have no plan to either use any consultant or recommend that
any particular consultant be engaged by GRC on any basis.
It is possible that compensation in the form of common stock, options,
warrants or other securities of GRC, cash or any combination thereof, may be
paid to outside consultants or finders. No securities of GRC will be paid to
officers, directors or promoters of GRC nor any of their respective affiliates.
Any payments of cash to a consultant or finder would be made by the business
acquired or persons affiliated or associated with it, and not by GRC. It is
possible that the payment of such compensation may become a factor in any
negotiations for GRC's acquisition of a business opportunity. Any such
negotiations and compensation may present conflicts of interest between the
interests of persons seeking compensation and those of GRC's shareholders, and
there is no assurance that any such conflicts will be resolved in favor of GRC's
shareholders.
STATE SECURITIES LAWS CONSIDERATIONS
Section 18 of the Securities Act of 1933, as amended in 1996, provides that
no law, rule, regulation, order or administrative action of any state may
require registration or qualification of securities or securities transactions
that involve the sale of a "covered security." The term "covered security" is
defined in Section 18 to include among other things transactions by "any person
not an issuer, underwriter or dealer," (in other words, secondary transactions
in securities already outstanding) that are exempted from registration by
Section 4(1) of the Securities Act of 1933, provided the issuer of the security
is a "reporting company," meaning that it files reports with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act.
Section 18 as amended preserves the authority of the states to require
certain limited notice filings by issuers and to collect fees as to certain
categories of covered securities, specifically including Section 4(1) secondary
transactions in the securities of reporting companies. Section 18 expressly
provides, however, that a state may not "directly or indirectly prohibit, limit,
or impose conditions based on the merits of such offering or issuer, upon the
offer or sale of any (covered) security." This provision prohibits states from
requiring registration or qualification of securities of an Exchange Act
reporting company which is current in its filings with the SEC.
The states generally are free to enact legislation or adopt rules that
prohibit secondary trading in the securities of "blank check" companies like
GRC. Section 18, however, of the Act preempts state law as to covered securities
of reporting companies. Thus, while the states may require certain limited
notice filings and payment of filing fees by GRC as a precondition to secondary
trading of its shares in those states, they cannot, so long as GRC is a
reporting issuer, prohibit, limit or condition trading in GRC's securities based
on the fact that GRC is or ever was a blank check company. GRC will comply with
such state limited notice filings as may be necessary in regard to secondary
trading. At this time, GRC's stock is not actively traded in any market, and an
active market in its common stock is not expected to arise, if ever, until after
completion of a business combination.
NO INVESTMENT COMPANY ACT REGULATION
Prior to completing a combination, GRC will not engage in the business of
investing or reinvesting in, or owning, holding or trading in securities, or
otherwise engaging in activities which would cause it to be classified as an
"investment company" under the 1940 Act. To avoid becoming an investment
company, not more than 40% of the value of GRC's assets (excluding government
securities and cash and cash equivalents) may consist of "investment
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securities," which is defined to include all securities other than U.S.
government securities and securities of majority-owned subsidiaries. Because GRC
will not own less than a majority of any assets or business acquired, it will
not be regulated as an investment company. GRC will not pursue any combination
unless it will result in GRC owning at least a majority interest in the business
acquired.
COMPETITION
GRC will be in direct competition with many entities in its efforts to
locate suitable business opportunities. Included in the competition will be
business development companies, venture capital partnerships and corporations,
small business investment companies, venture capital affiliates of industrial
and financial companies, broker-dealers and investment bankers, management and
management consultant firms and private individual investors. Most of these
entities will possess greater financial resources and will be able to assume
greater risks than those which GRC, with its limited capital, could consider.
Many of these competing entities will also possess significantly greater
experience and contacts than GRC's Management. Moreover, GRC also will be
competing with numerous other blank check companies for such opportunities.
EMPLOYEES
The only employees of GRC currently are its officers. It is not expected
that GRC will have additional employees except as a result of completing a
combination.
ITEM 2. MANAGEMENT'S DISCUSSION and ANALYSIS or PLAN of OPERATION.
GRC's plan of operation over the next twelve months is set forth above
under ITEM 1 (Description of Business). This plan of operation has been adopted
in order to attempt to create value for GRC's shareholders.
RESULTS of OPERATIONS
On October 30, 1998, GRC transferred all of its assets and liabilities and
embarked upon the business plan set forth in ITEM 1 above. Since that date, GRC
has had no operations, other than searching for a business or assets to acquire,
or revenues. GRC anticipates no operations unless and until it completes a
business combination as described above.
Prior to the October 1988 Stock Exchange Agreement, GRC was an independent
oil and gas service firm that provided geological, geophysical and geochemical
consulting services. Sales for the ten months of 1998 were $203,419 compared to
sales of $362,863 for the twelve months of 1997. GRC had a net loss of $1,067
for 1998 compared to net income of $35,818 for 1977.
LIQUIDITY and CAPITAL RESOURCES
As of the date of this Registration Statement, GRC has no cash and minimal
debts. GRC has no commitments for any capital expenditure and foresees none.
However, GRC will incur routine fees and expenses incident to its reporting
duties as a public company, and it will incur fees and expenses in the event it
makes or attempts to make an acquisition. As a practical matter, GRC expects no
significant operating costs other than professional fees payable to attorneys
and accountants. To the extent accounting services are performed by President
Stephen M. Siedow, an accountant, he has agreed not to charge GRC for those
services, although any other accountants utilized are expected to charge GRC
their customary rates.
GRC does not anticipate that funding will be necessary in order to complete
a proposed combination, except possibly for fees and costs of GRC's professional
advisers. Accordingly, there are no plans to raise capital to finance any
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business combination, nor does management believe that any combination candidate
will expect cash from GRC. GRC hopes to require the candidate companies to
deposit with GRC an advance which GRC can use to defray professional fees and
costs and travel, lodging and other due diligence costs of GRC's management.
Otherwise, management would have to advance such costs out of their own pockets,
and there is no assurance they will advance such costs.
Other routine expenses, such as making required filings with the Securities
and Exchange Commission, inevitably will be incurred. In order to pay these, GRC
will be forced to borrow money or prevail upon existing shareholders to
contribute additional funds, whether as a loan or investment, to GRC. It is by
no means certain that existing shareholders will want or be financially able to
do so. There are no plans to sell additional securities of GRC to raise capital.
GRC's failure to timely file reports required under the Securities Exchange Act
of 1934, as amended, could subject it to fines and penalties and make it less
desirable to a potential combination candidate. None of these sources of funds
is assured and, if no funds can be raised, GRC may be effectively unable to
pursue its business plan.
GRC shareholders and management members who advance money to GRC to cover
operating expenses will expect to reimbursed by the company acquired, prior to
or at the time of completing the combination. GRC has no intention of borrowing
money to pay any officer, director or shareholder of GRC or their affiliates.
YEAR 2000 ISSUES
Many computers and computer programs in use around the world for purposes
of economy contain only two fields for expression of dates and were programmed
to assume that all dates entered are for years in the twentieth century
beginning with "19" (e.g., 99 means 1999). It is believed that many computers
and software programs will crash on commencement of the year 2000, because they
will not recognize dates beginning with "20" instead of "19" and that widespread
computer crashes will have significant economic effects on governments,
companies and individuals. This is known as the "Y2K" problem or the "milennium
bug." The extent, severity and duration of the Y2K problem are unknown and
impossible to forecast. Moreover, experts disagree on the extent, severity and
duration of the Y2K problem, and on the economic losses and other damage that
may occur as a result of it.
GRC has no operations or revenues, does no business with customers, vendors
or suppliers, and has no material relationships with other companies. GRC
therefore does not anticipate that it will suffer any losses as a result of Y2K
issues. However, if general economic problems resulting from Y2K issues are
severe and prolonged, demand for blank check companies could be reduced or
eliminated for an unknown (and unknowable) period of time. Because GRC regularly
backs up its records and documents maintained on computer, any computer failure
should not directly cause GRC more than a modest inconvenience at worst.
ITEM 3. DESCRIPTION of PROPERTY.
GRC neither owns nor leases any real estate or other properties. GRC's
offices are located at 12373 E. Cornell Avenue, Aurora, Colorado 80014, and are
provided at no charge by its President. This arrangement is entirely adequate
for GRC's current needs. GRC does not have any plans to acquire any properties
or lease offices, and management does not anticipate that GRC will take office
space unless and until it has completed a business combination, in which case
GRC's offices almost certainly will be the same as those of the business
opportunity acquired.
ITEM 4. SECURITY OWNERSHIP of CERTAIN BENEFICIAL OWNERS and MANAGEMENT.
BENEFICIAL OWNERSHIP
The following table sets forth, as of the date of this Registration
Statement, the stock ownership of each executive officer and director of GRC, of
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all executive officers and directors of GRC as a group, and of each person known
by GRC to be a beneficial owner of 5% or more of its Common Stock. Except as
otherwise noted, each person listed below is the sole beneficial owner of the
shares and has sole investment and voting power as such shares. No person listed
below has any option, warrant or other right to acquire additional securities of
GRC, except as may be otherwise noted.
Name and Address Amount & Nature
of Beneficial of Beneficial Percent
Owner Ownership of Class
------------------------- ---------------- --------
*Stephen M. Siedow 1,951,456 (1, 3) 40.9%
12373 E. Cornell Avenue
Aurora, Colorado 80014
John D. Brasher Jr. 1,932,256 (2, 3) 40.5%
90 Madison Street, Suite 707
Denver, Colorado 80206
*All directors & officers 1,951,456 40.9%
as a group (1 person)
(1) Mr. Siedow disclaims beneficial ownership of 52,416 shares of
common stock owned by his wife, Linda M. Siedow, of 64,000 shares of
common stock held by his wife as custodian for his minor children,
and of 32,000 shares of common stock held by his daughter.
(2) Mr. Brasher disclaims beneficial ownership of 128,000 shares of common
stock owned by his wife, Lisa K. Brasher. Includes 160,000 shares of
common stock held by Yakima Corp., a corporation controlled by Mr.
Brasher and his wife.
(3) Includes 223,456 shares of common stock held by MNS Eagle Equity
Group, Inc., a corporation controlled by Mr. Brasher and Mr. Siedow.
Despite not having received any compensation and not having otherwise
engaged in any transactions involving the acquisition or disposition of assets
with GRC, the current officers and directors of GRC may be deemed to be
"promoters" and "founders" of GRC.
CHANGES in CONTROL
A change of control of GRC probably will occur upon consummation of a
business combination, which is anticipated to involve significant change in
ownership of GRC and in the membership of the board of directors. The extent of
any such change of control in ownership or board composition cannot be predicted
at this time.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS and CONTROL PERSONS.
Directors are elected for one-year terms or until the next annual meeting
of shareholders and until their successors are duly elected and qualified.
Executive officers (none of whom have an employment or similar contract)
continue in office at the pleasure of the Board of Directors. The following
table sets forth the name, age, position held and tenure of each director and
executive officer:
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Name Age Position Held and Tenure
------------------ --- ------------------------
Stephen M. Siedow 49 President, CEO, Director, Chairman of
the Board, October of 1998
There are no family relationships among the officers and directors. There
is no arrangement or understanding between GRC (or any of its directors or
officers) and any other person pursuant to which such person was or is to be
selected as a director or officer, or under which any officer or director will
resign at the request of another person, and no officer or director is acting or
will act on behalf of or at the direction of any other person. The directors and
officers are expected to devote their time to GRC's affairs on an "as needed"
basis, but are not required to make any specific portion of their time available
to GRC. It is anticipated that officers and directors will, on the average,
devote no more than 15 hours per week to GRC's affairs.
BIOGRAPHICAL INFORMATION
STEPHEN M. SIEDOW. Mr. Siedow is president and sole shareholder of Stephen
M. Siedow, P.C., a professional accounting firm providing auditing, management
consulting, tax services and write-up services to corporations, partnerships and
individuals since 1982. Mr. Siedow specializes in public and SEC accounting and
has experience in industries including mining (gold and coal), oil and gas,
construction, and mergers/acquisitions/liquidations. Prior to that, he was with
the audit department of Ernst & Young, Certified Public Accountants in Denver,
Colorado, for eight years. Mr. Siedow is a member of the American Institute of
Certified Public Accountants and the Colorado Society of Certified Public
Accountants.
Mr. Siedow also is a director, executive officer, promoter or control
person of the following companies with business plans substantially identical to
those of GRC:
o Chairman, CEO, President and significant shareholder of EQUICAP, INC.,
a formerly active California corporation no longer in the development
stage but which has scant assets.
o Chairman, CEO, President and significant shareholder of MNS EAGLE
EQUITY GROUP, INC., MNS EAGLE EQUITY GROUP I, INC., MNS EAGLE EQUITY
GROUP II, INC., MNS EAGLE EQUITY GROUP III, INC., and MNS EAGLE EQUITY
GROUP IV, INC., all Nevada corporations in the development stage.
PRIOR EXPERIENCE with BLANK CHECK COMPANIES
Mr. Siedow has never been an executive officer or director of a blank check
or "blind pool" company which conducted a public offering. Mr. Siedow has,
however, been an executive officer and director of several reporting blank check
companies (those required to file reports with the SEC), and his experience is
detailed below.
1. WHITNEY AMERICAN CORPORATION ("WHAM") - Organized 1987 in Delaware.
Effective on March 10, 1998, WHAM acquired Kemron Environmental Services, Inc. a
New York company, in a stock-for-stock exchange. In the exchange, WHAM issued to
the shareholders of Kemron Environmental Services, Inc. a total of 3,500,000
common shares. WHAM's common stock is quoted on the OTC Bulletin Board under the
symbol WHAM and trades sporadically. Mr. Siedow was not an officer or director
of WHAM following consummation of the merger. Neither Mr. Siedow nor any other
officer, director or shareholder of WHAM, nor their respective affiliates, sold
any stock in connection with the acquisition of Kemron Environmental Services,
Inc.
2. CASHBUILDER, INC. ("CBI") - Organized 1982 in Colorado. Mr. Siedow sold
shares of CBI amounting to control of CBI in a private transaction for an
aggregate of $50,000 in 1994. Otherwise, no officer, director or shareholder of
CBI, nor their respective affiliates, sold any stock in connection with any
acquisition made. Mr. Siedow was not an officer or director of CBI at the time
of sale.
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POTENTIAL CONFLICTS of INTEREST
The Company's Officers and Directors are affiliated with other companies
having a similar business plan to that of GRC ("Affiliated Companies") which may
compete directly or indirectly with GRC. GRC has not identified a specific
business area, industry or industry segment in which it will seek combination
candidates. GRC has made a determination that it will not concentrate its search
for combination candidates in any particular business, industry or industry
segment, since any such determination is potentially limiting and confers no
advantage to GRC or its shareholders. Certain specific conflicts of interest may
include those discussed below.
1. The interests of any Affiliated Companies from time to time may be
inconsistent in some respects with the interests of GRC. The nature of these
conflicts of interest may vary. There may be circumstances in which an
Affiliated Company may take advantage of an opportunity that might be suitable
for GRC. Although there can be no assurance that conflicts of interest will not
arise or that resolutions of any such conflicts will be made in a manner most
favorable to GRC and its shareholders, the officers and directors of GRC have a
fiduciary responsibility to GRC and its shareholders and, therefore, must adhere
to a standard of good faith and integrity in their dealings with and for GRC and
its shareholders.
2. The officers and directors of GRC serve as officers or directors of one
or more Affiliated Companies and may serve as officers and directors of other
Affiliated Companies in the future. GRC's officers and directors are required to
devote only so much of their time to GRC's affairs as they deem appropriate, in
their sole discretion. As a result, GRC's officers and directors may have
conflicts of interest in allocating their management time, services, and
functions among GRC and any current and future Affiliated Companies which they
may serve, as well as any other business ventures in which they are now or may
later become involved.
3. The Affiliated Companies may compete directly or indirectly with that of
GRC for the acquisition of available, desirable combination candidates. There
may be factors unique to GRC or an Affiliated Company which respectively makes
it more or less desirable to a potential combination candidate, such as age of
the company, name, capitalization, state of incorporation, contents of the
articles of incorporation, etc. However, any such direct conflicts are not
expected to be resolved through arm's-length negotiation, but rather in the
discretion of management. While any such resolution will be made with due regard
to the fiduciary duty owed to GRC and its shareholders, there can be no
assurance that all potential conflicts can be resolved in a manner most
favorable to GRC as if no conflicts existed. Members of GRC's management who
also are members of management of another Affiliated Company will also owe the
same fiduciary duty to the shareholders of the other Affiliated Company.
4. Certain conflicts of interest exist and will continue to exist between
GRC and its officers and directors due to the fact that each has other
employment or business interests to which he devotes his primary attention. Each
officer and director is expected to continue to do so in order to make a living,
notwithstanding the fact that management time should be devoted to GRC's
affairs. GRC has not established policies or procedures for the resolution of
current or potential conflicts of interest between GRC and its management.
As a practical matter, such potential conflicts could be alleviated only if
the Affiliated Companies either are not seeking a combination candidate at the
same time as the Company, have already identified a combination candidate, are
seeking a combination candidate in a specifically identified business area, or
are seeking a combination candidate that would not otherwise meet GRC's
selection criteria. It is likely, however, that the combination criteria of GRC
and any Affiliated Companies will be substantially identical. Ultimately, GRC's
shareholders ultimately must rely on the fiduciary responsibility owed to them
by GRC's officers and directors.
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There can be no assurance that members of management will resolve all
conflicts of interest in GRC's favor. The officers and directors are accountable
to GRC and its shareholders as fiduciaries, which means that they are legally
obligated to exercise good faith and integrity in handling GRC's affairs and in
their dealings with GRC. Failure by them to conduct GRC's business in its best
interests may result in liability to them. The area of fiduciary responsibility
is a rapidly developing area of law, and persons who have questions concerning
the duties of the officers and directors to GRC should consult their counsel.
INDEMNIFICATION of DIRECTORS and OFFICERS
See discussion under Part II, ITEM 5 below.
EXCLUSION of DIRECTOR LIABILITY
Pursuant to the General Corporation Law of Nevada, GRC's Certificate of
Incorporation excludes personal liability on the part of its directors to GRC
for monetary damages based upon any violation of their fiduciary duties as
directors, except as to liability for any acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law or for improper
payment of dividends. This exclusion of liability does not limit any right which
a director may have to be indemnified and does not affect any director's
liability under federal or applicable state securities laws.
ITEM 6. EXECUTIVE COMPENSATION.
CASH and OTHER COMPENSATION
Through October 30, 1998 GRC and its predecessor paid cash and cash
equivalent compensation to its executive officers and directors. No executive
officer or director received cash or cash equivalent compensation of more than
$50,000. Since October 30, 1998 and through the date of this Registration
Statement, GRC has not paid any executive officer or director any cash or cash
equivalent compensation. GRC has no other agreement or understanding, express or
implied, with any director or executive officer concerning employment or cash or
other compensation for services. GRC will undoubtedly pay compensation to
officers and other employees should it succeed in acquiring a business and funds
exist for compensation.
COMPENSATION PURSUANT to PLANS
Since inception of GRC and its predecessor and through the date of this
Registration Statement, no director or executive officer has received
compensation from GRC pursuant to any compensatory or benefit plan. There is no
plan or understanding, express or implied, to pay any compensation to any
director or executive officer pursuant to any compensatory or benefit plan of
GRC, although GRC anticipates that it will compensate its officers and directors
for services to GRC with stock or options to purchase stock, in lieu of cash.
GRC currently has in place an employee stock compensation plan and
compensatory stock option plan. GRC has no long-term incentive plans, as that
term is defined in the rules and regulations of the Securities and Exchange
Commission. There are no other compensatory or benefit plans, such as retirement
or pension plans, in effect or anticipated to be adopted, although other plans
may be adopted by new management following completion of a business combination.
EMPLOYEE STOCK COMPENSATION PLAN
GRC has adopted the 1997 Employee Stock Compensation Plan of its
predecessor for employees, officers, directors of GRC and advisors to GRC (the
"ESC Plan"). GRC has reserved a maximum of 1,000,000 Common Shares to be issued
upon the grant of awards under the ESC Plan. Employees will recognize taxable
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income upon the grant of Common Stock equal to the fair market value of the
Common Stock on the date of the grant and GRC will recognize a compensating
deduction for compensation expense at such time. The ESC Plan will be
administered by the Board of Directors or a committee of directors. No shares
have been awarded or currently are anticipated to be awarded under the ESC Plan.
COMPENSATORY STOCK OPTION PLAN
GRC has adopted the 1997 Compensatory Stock Option Plan of its predecessor
for officers, employees, directors and advisors (the "CSO Plan"). GRC has
reserved a maximum of 1,500,000 Common Shares to be issued upon the exercise of
options granted under the CSO Plan. The CSO Plan will not qualify as an
"incentive stock option" plan under Section 422 of the Internal Revenue Code of
1986, as amended. Options will be granted under the CSO Plan at exercise prices
to be determined by the Board of Directors or other CSO Plan administrator. With
respect to options granted pursuant to the CSO Plan, optionees will not
recognize taxable income upon the grant of options granted at or in excess of
fair market value. However, optionees will realize income at the time of
exercising an option to the extent the market price of the common stock at that
time exceeds the option exercise price, and GRC must recognize a compensation
expense in an amount equal to any taxable income realized by an optionee as a
result of exercising the option. The CSO Plan will be administered by the Board
of Directors or a committee of directors. No options have been granted or
currently are anticipated to granted under the CSO Plan.
EMPLOYMENT CONTRACTS
No person has entered into any employment or similar contract with GRC. It
is not anticipated that GRC will enter into any employment or similar contract
unless in conjunction with or following completion of a business combination.
ITEM 7. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS.
GRC is not indebted to any current or former officer, director, promoter or
control person. GRC has no understanding with its officers, directors or
shareholders, pursuant to which such persons are required to contribute capital
to GRC, loan money or otherwise provide funds to GRC, although management
expects that one or more of such persons may make funds available to GRC in the
event of need to cover operating expenses.
No officer, director or employee of GRC or its predecessor received a
salary of $60,000 or more in 1998 or 1997. There were no transactions, or series
of transactions, for the years ended December 31, 1998 or 1997, nor are there
any currently proposed transactions, or series of transactions, to which GRC is
(or GRC or its predecessor was) a party, in which the amount exceeds $60,000,
and in which to the knowledge of GRC any director, executive officer, nominee,
five percent or greater shareholder, or any member of the immediate family of
any of the foregoing persons, have or will have any direct or indirect material
interest.
ITEM 8. DESCRIPTION of SECURITIES.
The authorized capital stock of GRC consists of 50,000,000 shares of Common
Stock, $.001 par value, and 10,000,000 shares of Preferred Stock, $.001 par
value.
COMMON STOCK
At September 30, 1999, there were 4,768,000 shares of Common Stock
outstanding. The holders of Common Stock are entitled to one vote for each share
held. GRC's Certificate of Incorporation provides that the affirmative vote of a
majority of the votes cast at a shareholder's meeting is sufficient to effect
any corporate action upon which shareholders may or must vote. Common Shares do
not carry cumulative voting rights, thus holders of more than 50% of the Common
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Stock have the power to elect all directors if they wish and, as a practical
matter, to control GRC. Holders of Common Stock are not entitled to preemptive
rights, and the Common Stock is not subject to redemption.
GRC's bylaws provide for a board of one director, all of whom are elected
for one-year terms at the annual meeting of shareholders. The affirmative vote
of a simple majority of the outstanding Common Stock is necessary to remove a
director. A special meeting of shareholders may be called by the Chairman of the
Board, the President, a majority of the Board of Directors, or shareholders
owning in the aggregate 10% or more of the Common Stock. Holders of Common Stock
are entitled to receive, pro rata, dividends if, when and as declared by the
Board of Directors out of funds legally available therefor.
Upon liquidation, dissolution or winding up of GRC, holders of Common Stock
are entitled to share ratably in GRC's assets legally available for distribution
to its shareholders after payment of liquidation preference and outstanding
redemption rights (if any) on any Preferred Stock outstanding and are not
subject to further calls or assessments.
PREFERRED STOCK
Although no shares of Preferred Stock are being registered in this
Registration Statement or have previously been registered under the Exchange
Act, this discussion is included to enhance the reader's understanding of GRC.
No Preferred Shares are issued or outstanding, and GRC has no plans to issue any
Preferred Shares. The Board of Directors has the authority to issue Preferred
Stock in one or more series and to fix the voting powers, conversion rights,
other special rights and qualifications, limitations and restrictions of each
series, without any further vote or action by the shareholders. It is not
possible to state the actual effect of the authorization of any Preferred Stock
upon the rights of holders of the Common Stock, until the Board of Directors
determines the specific rights of the holders of the Preferred Stock. However,
the Preferred Stock may have adverse effects upon the holders of the Common
Stock, including (i) restrictions on dividends on the Common Stock if dividends
on the Preferred Stock have not been paid, (ii) dilution of the voting power of
the Common Stock to the extent that the Preferred Stock has voting rights, (iii)
dilution of the equity interest of the Common Stock to the extent that the
Preferred Stock is converted into Common Stock, or (iv) the Common Stock not
being entitled to share in GRC's assets upon liquidation until satisfaction of
any liquidation preference granted the holders of the Preferred Stock. GRC does
not currently anticipate that it will issue Preferred Stock in connection with
any business combination, but issuance for this purpose is a possibility. GRC
has not authorized such number of Preferred Shares for anti-takeover or similar
purposes.
ANNUAL REPORTS
GRC will furnish its shareholders with annual reports containing financial
statements of GRC as examined and reported upon by independent certified public
accountants. GRC will distribute other reports as determined by the Board of
Directors.
TRANSFER AGENT
GRC has not appointed a transfer agent or registrar for its Common Shares
and, in order to minimize expenses, does not expect to do so unless and until it
appears that its Common Shares will commence to trade.
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PART II
ITEM 1. MARKET PRICE of and DIVIDENDS on the REGISTRANT'S COMMON EQUITY and
OTHER SHAREHOLDER MATTERS.
PRICE RANGE of the COMMON STOCK
The common stock of GRC is the subject of an unpriced quotation (meaning
that is quoted "name only" without bid or asked prices posted) on the OTC
Bulletin Board maintained by the National Association of Securities Dealers,
Inc. The common stock has not traded to management's knowledge, and any trading
in the common stock would occur in the over-the-counter market. No active
trading market is expected to arise (if one ever arises), unless and until GRC
successfully completes a business combination. No shareholder has entered into a
lock-up or similar agreement as to his common shares.
DIVIDENDS
GRC has not declared or paid any dividends on its Common Stock to date.
Management anticipates that any future earnings will be retained as working
capital and used for business purposes. Accordingly, it is unlikely that GRC
will declare or pay any such dividends in the foreseeable future.
SHAREHOLDERS
GRC has approximately 43 shareholders of record. GRC has 4,768,000 common
shares issued and outstanding, of which approximately 831,300 shares are
unrestricted and not held by affiliates.
PUBLIC MARKET for the COMMON SHARES
There currently is no public market for GRC's common stock, and no
assurance can be given that a market will develop or that a shareholder ever
will be able to liquidate his investment without considerable delay, if at all.
If a market should develop, the price may be highly volatile. Unless and until
GRC's common shares are quoted on the NASDAQ system or listed on a national
securities exchange, it is likely that the common shares will be defined as
"penny stocks" under the Exchange Act and SEC rules thereunder. The Exchange Act
and penny stock rules generally impose additional sales practice and disclosure
requirements upon broker-dealers who sell penny stocks to persons other than
certain "accredited investors" (generally, institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 jointly with spouse) or in transactions
not recommended by the broker-dealer.
For transactions covered by the penny stock rules, the broker-dealer must
make a suitability determination for each purchaser and receive the purchaser's
written agreement prior to the sale. In addition, the broker-dealer must make
certain mandated disclosures in penny stock transactions, including the actual
sale or purchase price and actual bid and offer quotations, the compensation to
be received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the SEC. So long as GRC's common shares are
considered "penny stocks", many brokers will be reluctant or will refuse to
effect transactions in GRC's shares, and many lending institutions will not
permit the use of penny stocks as collateral for any loans.
ITEM 2. LEGAL PROCEEDINGS.
There are no legal proceedings which are pending or have been threatened
against GRC or any officer, director or control person of which management is
aware.
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ITEM 3. CHANGES in and DISAGREEMENTS with ACCOUNTANTS on ACCOUNTING and
FINANCIAL DISCLOSURE.
None.
ITEM 4. RECENT SALES of UNREGISTERED SECURITIES.
The following sets forth certain information with respect to all common
stock of GRC and its predecessor sold during the three-year period prior to the
filing of this Registration Statement.
1. On December 12, 1997, Gallagher Colorado, GRC's predecessor, entered
into a Merger Agreement with MNS Eagle Equity Group V, Inc. ("MNS"), a Nevada
corporation, pursuant to which MNS would on the effective date of the merger be
merged into Gallagher Colorado and disappear (the "1998 Merger".) The Merger
Agreement provided, among other things, that each of the 682,500 issued and
outstanding common shares of MNS would on the effective date of the 1998 Merger
be converted into and exchanged for four tenths (.4) of a fully paid and
nonassessable share of Gallagher Colorado's $.0001 par value common stock. A
total of 273,000 shares of Gallagher Colorado's common stock were issued to the
shareholders of MNS as a result of the 1998 Merger. The issuance of the 273,000
common shares of Gallagher Colorado in the 1998 Merger were not registered under
the Securities Act of 1933, as amended ("Act") but were instead issued in
reliance upon the exemption from such registration requirements afforded by Rule
504 of Regulation D under the Act, which is available for small offerings of
securities (including merger transactions) not exceeding $1,000,000 in value. At
the time of the 1998 Merger, Gallagher Colorado was an operating company out of
the development stage, not an investment company and not subject to the
reporting requirements of Section 15(d) or 13 of the Securities Exchange Act of
1934.
ITEM 5. INDEMNIFICATION of DIRECTORS and OFFICERS.
As permitted by Nevada law, GRC's Certificate of Incorporation provides
that GRC will indemnify its officers and directors against attorneys' fees and
other expenses and liabilities they incur to defend, settle or satisfy any civil
or criminal action brought against them arising out of their association with or
activities on behalf of GRC unless, in any such action, they are adjudged to
have acted with gross negligence or to have engaged in willful misconduct. GRC
may also bear the expenses of such litigation for any such persons upon their
promise to repay such sums if it is ultimately determined that they are not
entitled to indemnification. Such expenditures could be substantial and may not
be recouped, even if GRC is so entitled. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling GRC pursuant to the foregoing
provisions, GRC has been informed that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in that Act and is, therefore, unenforceable. Furthermore, it should be noted
that a successful indemnification of any officer or director could deplete the
assets of GRC.
PART F/S
(1) AUDITED FINANCIAL STATEMENTS.
Independent Auditor's Report ...................................... F-1
Balance Sheets as of December 31, 1998 and 1997.................... F-2
Statements of Operations for the years
ended December 31, 1998 and 1997 ................................. F-3
Statement of Stockholders' Equity for the years
ended December 31, 1998 and 1997 ................................. F-4
Statements of Cash Flows for the years
ended December 31, 1998 and 1997 ................................. F-5
Notes to Financial Statements ..................................... F-6
21
<PAGE>
(2) MANAGEMENT PREPARED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Balance Sheets as of September 30, 1999 and
December 31, 1998 ................................................ F-12
Statements of Operations for the nine months
ended September 30, 1999 and 1998 ................................ F-13
Statement of Stockholders' Equity for the nine
months ended September 30, 1999 and 1998.......................... F-14
Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 ................................ F-15
Notes to Financial Statements ..................................... F-16
PART III
ITEM 1. LIST OF EXHIBITS.
The following exhibits are either filed with this registration statement or
have previously been filed with the Securities and Exchange Commission and are
incorporated by reference to another report, registration statement or form. As
to any shareholder of record requesting a paper copy of this registration
statement, GRC will furnish any exhibit indicated in the list below as filed
with this report upon payment to GRC of its expenses in furnishing the
information.
2.1 Articles and Certificate of Merger (with Merger Agreement
attached therefore as Exhibit A), merging Gallagher
Colorado, a Colorado corporation, with and into GRC, a
Nevada corporation............................................. 1
2.2 Stock Exchange Agreement between Gallagher Colorado,
GRDC and certain individual shareholders....................... 1
2.3 Articles and Certificate of Merger (with Merger Agreement
attached therefore as Exhibit A), merging MNS, a Nevada
corporation, with Gallagher Colorado, a Colorado corporation... 1
3.1 Certificate of Incorporation of GRC as filed with the
Nevada Secretary of State on April 4, 1999..................... 1
3.2 Bylaws of GRC.................................................. 1
4.1 Specimen common stock certificate.............................. 1
10.1 1997 Compensatory Stock Option Plan of GRC..................... 1
10.2 1997 Employee Stock Compensation Plan of GRC................... 1
10.3 Assignment and Indemnity Agreement between Gallagher
Colorado and GRDC.............................................. 1
1 - Filed herewith as an exhibit.
2 - Incorporated by reference to another registration statement,
report or document.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATED: October 28, 1999
Gallagher Research Corporation
By /s/ Stephen M. Siedow
-----------------------------
Stephen M. Siedow, President and CEO
23
<PAGE>
Larry O'Donnell, CPA, P.C.
Telephone (303) 745-4545 2280 South Xanadu Way
Suite 370
Aurora, Colorado 80014
Independent Auditor's Report
Board of Directors and Stockholders
Gallagher Research Corporation
I have audited the accompanying balance sheets of Gallagher Research Corporation
as of December 31, 1998 and 1997 and the related statements of operations,
changes in stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Gallagher Research Corporation as
of December 31, 1998 and 1997 and the results of its operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Larry O'Donnell, CPA, P.C.
August 10, 1999
F-1
<PAGE>
GALLAGHER RESEARCH CORPORATION
Balance Sheets
ASSETS
December 31,
----------------------
1998 1997
--------- ---------
Current Assets:
Cash $ 245 $ 3,092
Accounts receivable, net -- 25,856
--------- ---------
245 28,948
Property and equipment:
Equipment -- 207,471
Less accumulated depreciation -- (183,160)
--------- ---------
-- 24,311
--------- ---------
$ 245 $ 53,259
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities $ -- $ 12,972
Income taxes payable -- 1,459
--------- ---------
-- 14,431
Stockholders' equity:
Preferred stock; $.0001 par value; authorized -
5,000,000 shares; issued - none -- --
Common stock; $.0001 par value; authorized -
50,000,000 shares; issued and outstanding -
298,000 and 1,200,000 shares, respectively 30 120
Additional paid-in capital 1,282 14,805
Retained earnings (deficit) (1,067) 23,903
--------- ---------
Total stockholders' equity 245 38,828
--------- ---------
$ 245 $ 53,259
========= =========
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
GALLAGHER RESEARCH CORPORATION
Statements of Operations
Year ended December 31,
---------------------------
1998 1997
----------- -----------
Net sales $ 203,419 $ 362,863
Cost of sales 63,565 150,882
----------- -----------
Gross profit 139,854 211,981
Costs and expenses:
Selling, general and administrative 140,163 169,657
----------- -----------
Income (loss) from operations (309) 42,324
Other income (expense):
Interest 10 (810)
Merger related costs (1,066) --
Other, net -- (4,237)
----------- -----------
Income (loss) before income taxes (1,365) 37,277
Income tax provision (benefit) (298) 1,459
----------- -----------
Net income (loss) $ (1,067) $ 35,818
=========== ===========
Net income per common share $ .00 $ .03
=========== ===========
Weighted average common shares outstanding 1,049,667 1,200,000
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
GALLAGHER RESEARCH CORPORATION
Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1998 and 1997
Common Stock Additional Retained
------------------------------ Paid-in Earnings
Shares Amount Capital (Deficit)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balances, December 31, 1996 1,200,000 $ 120 $ 14,805 $ (11,915)
Net income 35,818
---------- ---------- ---------- ----------
Balances, December 31, 1997 1,200,000 120 14,805 23,903
Common stock issued in a merger 273,000 27 854 --
Redemption of common stock (1,175,000) (117) (14,377) (23,903)
Net loss (1,067)
---------- ---------- ---------- ----------
Balances, December 31, 1998 298,000 $ 30 $ 1,282 $ (1,067)
========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
GALLAGHER RESEARCH CORPORATION
Statements of Cash Flows
Year ended December 31,
------------------------------
1998 1997
-------- --------
Cash flows from operating activities:
Net income (loss) $ (1,067) $ 35,818
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 15,873 31,079
Loss on disposal of assets -- 17,671
Changes in operating assets and liabilities:
Accounts receivable 25,856 33,540
Accounts payable -- (13,967)
Accrued liabilities (12,972) 12,924
Customer deposits -- (85,000)
Income taxes payable (1,459) 1,459
-------- --------
Net cash provided by operating activities 26,231 33,524
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (8,599) (11,090)
Proceeds from sale of property and equipment 17,037 10,500
Common stock issued in a merger 881 --
-------- --------
Net cash provided by (used in) investing activities 9,319 (590)
-------- --------
Cash flows from financing activities:
Proceeds under line of credit -- 800
Repayments under line of credit -- (25,350)
Repayment of note payable -- (5,292)
Redemption of common stock (38,397) --
-------- --------
Net cash (used in) financing activities (38,397) (29,842)
-------- --------
Net increase (decrease) in cash (2,847) 3,092
Cash at beginning of year 3,092 --
-------- --------
Cash at end of year $ 245 $ 3,092
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ -- $ 810
======== ========
Income taxes paid $ 1,459 $ --
======== ========
The accompanying notes are an integral part of the financial statements.
F-5
</TABLE>
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Description of Business
- -----------------------
The financial statements presented are those of Gallagher Research Corporation
(the "Company"). The Company was incorporated on July 27, 1983, under the laws
of the State of Colorado. The Company was an independent oil and gas service
firm that provided geological, geophysical and geochemical consulting services.
The Company has performed consulting projects in every major producing area
within the United States and most of Canada. It has also completed projects in
Australia and Pakistan. In December 1997, the Company filed with the Colorado
Secretary of State a Certificate of Amendment and Restatement to the Articles of
Incorporation that, among other things, changed the Company's name to Gallagher
Research and Development Company from Gallagher Research and Development
Company, Inc. (See Note 4). On October 28, 1998 a majority of the Company's
shareholders approved a change in the state of incorporation from Colorado to
Nevada, and a change in the Company's name from Gallagher Research and
Development Company to Gallagher Research Corporation (See Note 10).
The Company has been exploring sources to obtain additional equity or debt
financing. The Company has also indicated its intention to participate in one or
more as yet unidentified business ventures, which management will select after
reviewing the business opportunities for their profit or growth potential.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reporting amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
Property and Equipment
- ----------------------
Property and equipment is stated at cost. Depreciation is computed using
accelerated methods over the estimated useful live of the related assets,
generally three to five years.
Expenditures for major acquisitions and improvements are capitalized while
expenditures for maintenance and repairs are charged to operations. The cost of
assets sold or retired and any related accumulated depreciation are eliminated
from the accounts, and any resulting gain or loss is included in operations.
F-6
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements
Fair Value of Financial Instruments
- -----------------------------------
The fair value of the Company's payable due to officers/stockholders is not
practicable to estimate due to the related party nature of the underlying
transactions and the indefinite payment terms.
Income Taxes
- ------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the statement of
operations in the period that includes the enactment date.
Revenue Recognition
- -------------------
The Company recognizes revenue when services are provided. To the extent that
the Company receives payment for services in advance, such prepaid amounts are
recorded as deposits until the services are provided.
Per Common Share Data
- ---------------------
Income per common share is computed by dividing the net income by the weighted
average shares outstanding during the period.
Note 2 - Stockholders' Equity
Common Stock
- ------------
On December 10, 1997, the Company's shareholders approved a restructuring of the
Company's authorized and outstanding capital through (1) a 1,000 to 1 forward
stock split, (2) an increase in the Company's authorized capital stock to
50,000,000 shares of common stock and 5,000,000 shares of preferred stock, (3) a
change in par value to $.0001 per share for both the common and preferred stock
of the Company, and (4) a change in the name of the Company from Gallagher
Research and Development Company, Inc. to Gallagher Research and Development
Company. All share and per share amounts have been restated to reflect this
restructuring.
Dividends will be paid on outstanding shares as declared by the Board of
Directors. Each share of common stock is entitled to one vote.
F-7
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements
Preferred Stock
- ---------------
No shares of the Company's $.0001 par value preferred stock have been issued or
are outstanding. Dividends, voting rights and other terms, rights and
preferences of the preferred shares have not been designated but may be
designated by the Board of Directors from time to time.
1997 Stock Option Plan
- ----------------------
The Company has adopted a stock option plan (the "CSO Plan") which allows for
the issuance of options to purchase up to 1,000,000 shares of stock to
employees, officers, directors and consultants of the Company. The CSO Plan is
not intended to qualify as an "incentive stock option plan" under Section 422 of
the Internal Revenue Code. Options will be granted under the CSO Plan at
exercise prices to be determined by the Board of Directors or other CSO Plan
administrator. The Company will incur compensation expense to the extent that
the market value of the stock at date of grant exceeds the amount the grantee is
required to pay for the options. No options have been granted under the CSO Plan
to date.
1997 Employee Stock Compensation Plan
- -------------------------------------
The Company has adopted an employee stock compensation plan (the "ESC Plan")
which allows for the issuance of up to 1,500,000 shares of stock to employees,
officers, directors and consultants of the Company. The Company will incur
compensation expense to the extent the market value of the stock at date of
grant exceeds the amount the employee is required to pay for the stock (if any).
The ESC Plan will be administered by the Board of Directors or a committee of
directors. No stock has been awarded under the ESC Plan to date.
Note 3 - Merger with MNS Eagle Equity Group V, Inc.
On December 12, 1997, the Company entered into a Merger Agreement with MNS Eagle
Equity Group V, Inc. ("MNS"), a Nevada corporation, pursuant to which MNS would
on the effective date of the merger be merged into the Company and disappear.
The Merger Agreement provided, among other things, that each of the 682,500
issued and outstanding common shares of MNS would on the effective date of the
merger be converted and exchanged for four tenths (.4) of a fully paid and
nonassessable share of the Company's $.0001 par value common stock. A total of
273,000 shares of the Company's common stock were issued to the shareholders of
MNS as a result of the Merger.
On December 16, 1997, the Company and MNS each held a special shareholders'
meeting for the purpose of considering the proposed merger. The shareholders of
both companies approved the merger. The Articles of Merger were duly filed with
the Colorado Secretary of State on December 30, 1997, and with the Nevada
Secretary of State on January 21, 1998, the effective date of the merger.
F-8
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements
The issuance of the merger common shares of the Company have not been and will
not be registered with the SEC under the Securities Act of 1933, as amended
("Act"). The Company is relying on the exemption from such registration
requirements afforded by Rule 504 of Regulation D under the Act, which is
available for small offerings of securities (including merger transactions) not
exceeding $1,000,000 in value.
Note 4 - Stock Exchange Agreement
Pursuant to an Assignment and Indemnity Agreement dated June 8, 1998, the
Company transferred its business and all of its assets to GRDC, Inc. ("GRDC"),
its wholly owned subsidiary, which also assumed all liabilities of the Company.
The Company owned all 10,000 shares of common stock, no par value, of GRDC, Inc.
issued and outstanding. The business of the Company thus has been operated by
GRDC since that date.
The principal reason the Company entered into a merger with MNS was to allow the
Company to become publicly held and thus have the ability to raise capital and
create liquidity in its common stock. Due to the volatility of the stock
markets, the Company has not been able to raise capital as a public company. On
October 9, 1998 the Company, GRDC, and the shareholders who were the original
owners of the Company prior to the Merger (the "Original Shareholders") entered
into a Stock Exchange Agreement, whereby the Original Shareholders agreed to
exchange 1,175,000 of their 1,200,000 shares of the Company for all the shares
of GRDC in order to obtain complete ownership of GRDC and operate it as a
privately held company. On October 28, 1998 the Company's shareholders
(including the Original Shareholders) approved the consummation of the Stock
Exchange Agreement. As a result of cancelling 1,175,000 of the shares currently
owned by the Original Shareholders, the rest of the Company's shareholders own a
much larger percentage of the Company, since the total outstanding shares of the
Company was reduced to 298,000. As of October 30, 1998, the Company essentially
became a shell company with a new business plan to either acquire a small to
medium-size business (or its assets) actively engaged in a business generating
revenues or having immediate prospects of generating revenues, or to originate a
business.
Note 5 - Line of Credit
The Company had a $25,000 line of credit ("LOC") with a local bank that was
renewable annually. The LOC was secured by the personal residence of a major
stockholder/officer. The LOC bears interest at the bank's prime interest rate
plus 2%.
F-9
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements
Note 6 - Income Taxes
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
------- -------
<S> <C> <C>
Current:
Federal $ (298) $ 1,080
State -- 379
------- -------
$ (298) $ 1,459
======= =======
The provision (benefit) for income taxes differs from an amount computed by
applying the statutory income tax rate to pretax income as follows:
Federal tax provision at statutory rate $ (205) $ 6,819
State tax provision, net of federal tax benefit (58) 1,584
Utilization of NOL not previously realized -- (6,187)
Other -- (757)
------- -------
$ (263) $ 1,459
======= =======
The Company's deferred tax assets are as follows:
Net operating loss carryforward $ 263 $ --
Valuation allowance (263) --
------- -------
$ -- $ --
======= =======
</TABLE>
At December 31, 1998, the Company has net operating loss carryforwards of $1,365
which may be available to offset future taxable income through 2018.
Note 7 - Major Customers
During the years ended December 31, 1998 and 1997, one customer accounted for
approximately 78.0% and 66.7% of the Company's revenues, respectively (See Note
4).
Note 8 - Related Party Transactions
The Company rents its office facilities on a month to month basis from a
significant stockholder and former officer. Rental expense was $9,000 and
$10,800 for the years ended December 31, 1998 and 1997 (See Note 4).
The Company sold a vehicle to a significant stockholder and former officer at
fair market value during the year ended December 31, 1997. A loss of $6,141 was
recorded on the vehicle sales transaction.
F-10
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements
Note 9 - Vehicle Leases
The Company leases a vehicle under a noncancellable three year operating lease
that expires in March, 2001. Rental expense plus excessive mileage usage
deduction amounted to $8,887 and $12,560, respectively, for the years ended
December 31, 1998 and 1997. Future minimum rental payments at December 31, 1998
were zero (See Note 4).
Note 10 - Subsequent Events
Restructuring of Company
- ------------------------
On October 28, 1998, a majority of the Company's shareholders approved a change
in the state of incorporation from Colorado to Nevada, and a change in the
Company's name from Gallagher Research and Development Company to Gallagher
Research Corporation.
The reincorporation was effected on April 2, 1999 by merging the Company into
Gallagher Research Corporation ("Gallagher Nevada"), a wholly owned subsidiary
of the Company which was incorporated for the purposes of the reincorporation
merger pursuant to an Agreement and Plan of Merger between the Company and
Gallagher Nevada.
Stock Split
- -----------
On April 16, 1999 the Company forward split its common stock 16 to 1. All share
and per share amounts have not been restated to reflect this forward stock
split.
F-11
<PAGE>
<TABLE>
<CAPTION>
GALLAGHER RESEARCH CORPORATION
Balance Sheets (Unaudited)
ASSETS
September 30, December 31,
1999 1998
------------- ------------
Current Assets:
<S> <C> <C>
Cash $ -- $ 245
------- -------
$ -- $ 245
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 3,650 $ --
------- -------
Stockholders' equity (deficit):
Preferred stock; $.0001 par value; authorized -
5,000,000 shares; issued - none -- --
Common stock; $.0001 par value; authorized -
50,000,000 shares; issued and outstanding -
4,768,000 and 298,000 shares, respectively 477 30
Additional paid-in capital 835 1,282
Retained earnings (deficit) (4,962) (1,067)
------- -------
Total stockholders' equity (deficit) (3,650) 245
------- -------
$ -- $ 245
======= =======
The accompanying notes are an integral part of the financial statements.
F-12
</TABLE>
<PAGE>
GALLAGHER RESEARCH CORPORATION
Statements of Operations (Unaudited)
Nine Months Ended
September 30,
---------------------------
1999 1998
----------- -----------
Net sales $ -- $ 180,296
Cost of sales -- 54,280
----------- -----------
Gross profit -- 126,016
Costs and expenses:
Selling, general and administrative 3,895 128,132
----------- -----------
Income (loss) from operations (3,895) (2,116)
Other income (expense):
Interest -- --
Merger related costs -- (1,066)
----------- -----------
Income (loss) before income taxes (3,895) (3,182)
Income tax provision (benefit) -- (298)
----------- -----------
Net income (loss) $ (3,895) $ (2,884)
=========== ===========
Net income per common share $ .001 $ .002
=========== ===========
Weighted average common shares outstanding 4,768,000 1,473,000
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
<TABLE>
<CAPTION>
GALLAGHER RESEARCH CORPORATION
Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)
Common Stock Additional Retained
------------------------------ Paid-in Earnings
Shares Amount Capital (Deficit)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balances, December 31, 1996 1,200,000 $ 120 $ 14,805 $ (11,915)
Net income 35,818
---------- ---------- ---------- ----------
Balances, December 31, 1997 1,200,000 120 14,805 23,903
Common stock issued in a merger 273,000 27 854 --
Redemption of common stock (1,175,000) (117) (14,377) (23,903)
Net loss (1,067)
---------- ---------- ---------- ----------
Balances, December 31, 1998 298,000 30 1,282 (1,067)
Forward stock split of 16 to 1 4,470,000 447 (447) --
Net loss for the period (3,895)
---------- ---------- ---------- ----------
Balances, September 30, 1999 4,768,000 $ 477 $ 835 $ (4,962)
========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
GALLAGHER RESEARCH CORPORATION
Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
------------------------------
1999 1998
-------- --------
Cash flows from operating activities:
Net income (loss) $ (3,895) $ (2,884)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation -- 15,146
Loss on disposal of assets -- --
Changes in operating assets and liabilities:
Accounts receivable -- 16,743
Accounts payable 3,650 --
Accrued liabilities -- (11,147)
Income taxes payable -- (1,459)
-------- --------
Net cash provided by (used in) operating activities (245) 16,399
-------- --------
Cash flows from investing activities:
Purchases of property and equipment -- (8,599)
Proceeds from sale of property and equipment -- --
Acquisition of other assets -- (100)
Common stock issued in a merger -- 881
-------- --------
Net cash provided by (used in) investing activities -- (7,818)
-------- --------
Cash flows from financing activities:
Proceeds under line of credit -- --
Repayments under line of credit -- --
Redemption of common stock -- --
-------- --------
Net cash (used in) financing activities -- --
-------- --------
Net increase (decrease) in cash (245) 8,581
Cash at beginning of period 245 3,092
-------- --------
Cash at end of period $ -- $ 11,673
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ -- $ --
======== ========
Income taxes paid $ -- $ 1,459
======== ========
The accompanying notes are an integral part of the financial statements.
F-15
</TABLE>
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements (Unaudited)
Note 1 - Summary of Significant Accounting Policies
Description of Business
- -----------------------
The financial statements presented are those of Gallagher Research Corporation
(the "Company"). The Company was incorporated on July 27, 1983, under the laws
of the State of Colorado. The Company was an independent oil and gas service
firm that provided geological, geophysical and geochemical consulting services.
The Company has performed consulting projects in every major producing area
within the United States and most of Canada. It has also completed projects in
Australia and Pakistan. In December 1997, the Company filed with the Colorado
Secretary of State a Certificate of Amendment and Restatement to the Articles of
Incorporation that, among other things, changed the Company's name to Gallagher
Research and Development Company from Gallagher Research and Development
Company, Inc. (See Note 4). On October 28, 1998 a majority of the Company's
shareholders approved a change in the state of incorporation from Colorado to
Nevada, and a change in the Company's name from Gallagher Research and
Development Company to Gallagher Research Corporation (See Note 10).
The Company has been exploring sources to obtain additional equity or debt
financing. The Company has also indicated its intention to participate in one or
more as yet unidentified business ventures, which management will select after
reviewing the business opportunities for their profit or growth potential.
Unaudited Interim Financial Statements
- --------------------------------------
The unaudited financial statements as of September 30, 1999 and for the
nine-month periods ended September 30, 1999 and 1998 have been prepared on the
same basis as the Company's audited financial statements, and, in the opinion of
management, includes all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the financial statements of
such interim periods in accordance with generally accepted accounting
principles. Results for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
Use of Estimates
- ----------------
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reporting amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
Property and Equipment
- ----------------------
Property and equipment is stated at cost. Depreciation is computed using
accelerated methods over the estimated useful live of the related assets,
generally three to five years.
Expenditures for major acquisitions and improvements are capitalized while
expenditures for maintenance and repairs are charged to operations. The cost of
assets sold or retired and any related accumulated depreciation are eliminated
from the accounts, and any resulting gain or loss is included in operations.
F-16
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements (Unaudited)
Fair Value of Financial Instruments
- -----------------------------------
The fair value of the Company's payable due to officers/stockholders is not
practicable to estimate due to the related party nature of the underlying
transactions and the indefinite payment terms.
Income Taxes
- ------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the statement of
operations in the period that includes the enactment date.
Revenue Recognition
- -------------------
The Company recognizes revenue when services are provided. To the extent that
the Company receives payment for services in advance, such prepaid amounts are
recorded as deposits until the services are provided.
Per Common Share Data
- ---------------------
Income per common share is computed by dividing the net income by the weighted
average shares outstanding during the period.
Note 2 - Stockholders' Equity (Deficit)
Common Stock Transactions
- -------------------------
On December 10, 1997, the Company's shareholders approved a restructuring of the
Company's authorized and outstanding capital through (1) a 1,000 to 1 forward
stock split, (2) an increase in the Company's authorized capital stock to
50,000,000 shares of common stock and 5,000,000 shares of preferred stock, (3) a
change in par value to $.0001 per share for both the common and preferred stock
of the Company, and (4) a change in the name of the Company from Gallagher
Research and Development Company, Inc. to Gallagher Research and Development
Company. All share and per share amounts have been restated to reflect this
restructuring.
F-17
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements (Unaudited)
On October 28, 1998, a majority of the Company's shareholders approved a change
in the state of incorporation from Colorado to Nevada, and a change in the
Company's name from Gallagher Research and Development Company to Gallagher
Research Corporation.
The reincorporation was effected on April 6, 1999 by merging the Company into
Gallagher Research Corporation ("Gallagher Nevada"), a wholly owned subsidiary
of the Company which was incorporated for the purposes of the reincorporation
merger pursuant to an Agreement and Plan of Merger between the Company and
Gallagher Nevada.
On April 16, 1999 the Company forward split its common stock 16 to 1. All share
and per share amounts for 1999 have been adjusted to reflect this forward stock
split.
Dividends will be paid on outstanding shares as declared by the Board of
Directors. Each share of common stock is entitled to one vote.
Preferred Stock
- ---------------
No shares of the Company's $.0001 par value preferred stock have been issued or
are outstanding. Dividends, voting rights and other terms, rights and
preferences of the preferred shares have not been designated but may be
designated by the Board of Directors from time to time.
1997 Stock Option Plan
- ----------------------
The Company has adopted a stock option plan (the "CSO Plan") which allows for
the issuance of options to purchase up to 1,000,000 shares of stock to
employees, officers, directors and consultants of the Company. The CSO Plan is
not intended to qualify as an "incentive stock option plan" under Section 422 of
the Internal Revenue Code. Options will be granted under the CSO Plan at
exercise prices to be determined by the Board of Directors or other CSO Plan
administrator. The Company will incur compensation expense to the extent that
the market value of the stock at date of grant exceeds the amount the grantee is
required to pay for the options. No options have been granted under the CSO Plan
to date.
1997 Employee Stock Compensation Plan
- -------------------------------------
The Company has adopted an employee stock compensation plan (the "ESC Plan")
which allows for the issuance of up to 1,500,000 shares of stock to employees,
officers, directors and consultants of the Company. The Company will incur
compensation expense to the extent the market value of the stock at date of
grant exceeds the amount the employee is required to pay for the stock (if any).
The ESC Plan will be administered by the Board of Directors or a committee of
directors. No stock has been awarded under the ESC Plan to date.
F-18
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements (Unaudited)
Note 3 - Merger with MNS Eagle Equity Group V, Inc.
On December 12, 1997, the Company entered into a Merger Agreement with MNS Eagle
Equity Group V, Inc. ("MNS"), a Nevada corporation, pursuant to which MNS would
on the effective date of the merger be merged into the Company and disappear.
The Merger Agreement provided, among other things, that each of the 682,500
issued and outstanding common shares of MNS would on the effective date of the
merger be converted and exchanged for four tenths (.4) of a fully paid and
nonassessable share of the Company's $.0001 par value common stock. A total of
273,000 shares of the Company's common stock were issued to the shareholders of
MNS as a result of the Merger.
On December 16, 1997, the Company and MNS each held a special shareholders'
meeting for the purpose of considering the proposed merger. The shareholders of
both companies approved the merger. The Articles of Merger were duly filed with
the Colorado Secretary of State on December 30, 1997, and with the Nevada
Secretary of State on January 21, 1998, the effective date of the merger.
The issuance of the merger common shares of the Company have not been and will
not be registered with the SEC under the Securities Act of 1933, as amended
("Act"). The Company is relying on the exemption from such registration
requirements afforded by Rule 504 of Regulation D under the Act, which is
available for small offerings of securities (including merger transactions) not
exceeding $1,000,000 in value.
Note 4 - Stock Exchange Agreement
Pursuant to an Assignment and Indemnity Agreement dated June 8, 1998, the
Company transferred its business and all of its assets to GRDC, Inc. ("GRDC"),
its wholly owned subsidiary, which also assumed all liabilities of the Company.
The Company owned all 10,000 shares of common stock, no par value, of GRDC, Inc.
issued and outstanding. The business of the Company thus has been operated by
GRDC since that date.
The principal reason the Company entered into a merger with MNS was to allow the
Company to become publicly held and thus have the ability to raise capital and
create liquidity in its common stock. Due to the volatility of the stock
markets, the Company has not been able to raise capital as a public company. On
October 9, 1998 the Company, GRDC, and the shareholders who were the original
owners of the Company prior to the Merger (the "Original Shareholders") entered
into a Stock Exchange Agreement, whereby the Original Shareholders agreed to
exchange 1,175,000 of their 1,200,000 shares of the Company for all the shares
of GRDC in order to obtain complete ownership of GRDC and operate it as a
privately held company. On October 28, 1998 the Company's shareholders
(including the Original Shareholders) approved the consummation of the Stock
Exchange Agreement. As a result of cancelling 1,175,000 of the shares currently
F-19
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements (Unaudited)
owned by the Original Shareholders, the rest of the Company's shareholders own a
much larger percentage of the Company, since the total outstanding shares of the
Company was reduced to 298,000. As of October 30, 1998, the Company essentially
became a shell company with a new business plan to either acquire a small to
medium-size business (or its assets) actively engaged in a business generating
revenues or having immediate prospects of generating revenues, or to originate a
business.
Note 5 - Line of Credit
The Company had a $25,000 line of credit ("LOC") with a local bank that was
renewable annually. The LOC was secured by the personal residence of a major
stockholder/officer. The LOC bears interest at the bank's prime interest rate
plus 2%.
Note 6 - Income Taxes
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
September 30,
----------------------
1999 1998
------- -------
<S> <C> <C>
Current:
Federal $ -- $ (298)
State -- --
------- -------
$ -- $ (298)
======= =======
The provision (benefit) for income taxes differs from an amount computed by
applying the statutory income tax rate to pretax income as follows:
Federal tax provision at statutory rate $ (584) $ (433)
State tax provision, net of federal tax benefit (166) (122)
Other -- --
------- -------
$ (750) $ (555)
======= =======
The Company's deferred tax assets are as follows:
Net operating loss carryforward $ 1,013 $ 555
Valuation allowance (1,013) (555)
------- -------
$ -- $ --
======= =======
</TABLE>
At September 30, 1999, the Company has net operating loss carryforwards of
$5,260 which may be available to offset future taxable income through 2019.
F-20
<PAGE>
GALLAGHER RESEARCH CORPORATION
Notes to Financial Statements (Unaudited)
Note 7 - Major Customers
During the nine months ended September 30, 1999 and 1998, one customer accounted
for 0% and 77% of the Company's revenues, respectively (See Note 4).
Note 8 - Related Party Transactions
The Company rents its office facilities on a month to month basis from a
significant stockholder and former officer. Rental expense was $0 and $8,100 for
the nine months ended September 30, 1999 and 1998 (See Note 4).
Note 9 - Vehicle Leases
The Company leases a vehicle under a noncancellable three year operating lease
that expires in March, 2001. Rental expense plus excessive mileage usage
deduction amounted to $0 and $5,620, respectively, for the nine months ended
September 30, 1999 and 1998. Future minimum rental payments at September 30,
1999 were zero (See Note 4).
F-21
Exhibit 2.1
ARTICLES AND CERTIFICATE OF MERGER
of
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
(A Colorado Corporation)
into
GALLAGHER RESEARCH CORPORATION
(A Nevada Corporation)
Pursuant to Section 92A.190 of the Nevada General Corporation Law and
Section 7-111-107 of the Colorado Business Corporation Act, the two undersigned
corporations (the "Constituent Corporations") adopt the following Articles and
Certificate of Merger for the purpose of merging them into one corporation (the
"Merger"), and each corporation hereby certifies to the information below with
respect to the Merger:
FIRST: The names and state of incorporation of the two Constituent
Corporations effecting the Merger are:
Name Domicile Status
---- -------- ------
GALLAGHER RESEARCH CORPORATION.........Nevada........... Surviving Corporation
GALLAGHER RESEARCH
AND DEVELOPMENT COMPANY..............Colorado...........Assimilated Corporation
SECOND: The name of the Surviving Corporation in the Merger shall be
GALLAGHER RESEARCH CORPORATION. Section 7-111-107 of the Colorado Business
Corporation Act and Section 92A.190 of the Nevada General Corporation Law
permits this Merger. The Surviving Corporation has authorized 50,000,000 common
shares, $.001 par value, of which 100 shares (all owned by Assimilated
Corporation) are issued and outstanding, and 5,000,000 preferred shares, $.001
par value, none of which have been issued or are outstanding. The Assimilated
Corporation has authorized 50,000,000 common shares, $.0001 par value, 298,000
of which are issued and outstanding, and 5,000,000 preferred shares, $.0001 par
value, none of which have been issued or are outstanding.
THIRD: The Merger shall not effect any change in the Certificate of
Incorporation of the Surviving Corporation as in effect on the date these
Articles and Certificate of Merger are duly filed with the respective
Secretaries of State of the States of Nevada and Colorado.
FOURTH: A copy of the Merger Agreement dated April 2, 1999, setting forth
the terms and conditions of the Merger and of the manner of converting the
outstanding securities of the Assimilated Corporation into securities of the
Surviving Corporation, is appended in the form executed to these Articles and
Certificate of Merger as Exhibit A and is herein fully incorporated by
reference, and will be furnished to any shareholder of a Constituent
Corporation, without charge, who so requests.
FIFTH: The Merger Agreement has been approved and adopted by the respective
boards of directors of the Constituent Corporations and certified, executed and
acknowledged by each of the Constituent Corporations in the manner prescribed by
the respectively applicable laws of Nevada and Colorado.
SIXTH: The Merger Agreement was duly approved, as follows:
(a) by the shareholders of the Assimilated Corporation on October 28, 1998,
voting 1,466,424 shares FOR and -0- AGAINST, out of a total of 1,473,000
voting shares issued and outstanding entitled to vote thereon, all of a
class, a number sufficient for approval; and
1
<PAGE>
(b) by the shareholders of the Surviving Corporation on April 2, 1999,
voting 100 shares FOR and -0- AGAINST, out of a total of 100 voting shares
issued and outstanding entitled to vote thereon, all of a class, a number
sufficient for approval.
SEVENTH: An executed Merger Agreement is on file at the principal place of
business of the Surviving Corporation, which is located at 90 Madison Street,
Suite 707, Denver, Colorado 80206, and a copy thereof will be furnished without
charge to any shareholder of a Constituent Corporation who so requests.
EIGHTH: The Registered Office of the Surviving Corporation in the State of
Nevada is located at 2533 North Carson Street, Carson City, Nevada 89706, and
the Registered Agent at such address is Laughlin Associates, Inc.
NINTH: The Surviving Corporation in this Merger by execution and the due
filing of these Articles of Merger hereby agrees that it:
(a) may be served with process in the State of Colorado in any proceeding
for the enforcement of any obligation of the Assimilated Corporation and in
any proceeding for the enforcement of the rights of any dissenting
shareholder of the Assimilated Corporation against the Surviving
Corporation;
(b) irrevocably appoints the Secretary of the Department of State of the
State of Colorado as its agent to accept service of process in any such
proceeding brought against the Assimilated Corporation in the State of
Colorado, which should be served on the Surviving Corporation at the
address set forth in Article SEVENTH above; and
(c) will promptly pay to the dissenting shareholders, if any, of the
Assimilated Corporation the amount, if any, to which they are entitled
under the provisions of the Colorado Business Corporation Act with respect
to the rights of dissenting shareholders.
TENTH: The Merger shall be effective when these Articles of Merger are duly
filed for recordation with the office of the Secretary of State of the State of
Nevada.
IN WITNESS WHEREOF, these Articles and Certificate of Merger have been duly
executed as of the date set forth below by the authorized officers of the
Constituent Corporations.
Dated: April 2, 1999
GALLAGHER RESEARCH CORPORATION
(A Nevada Corporation)
ATTEST: By /s/ Stephen M. Siedow
------------------------------
Stephen M. Siedow, President
2
<PAGE>
By /s/ Elisabeth M. Crosse
---------------------------------
Secretary or Assistant Secretary
GALLAGHER RESEARCH AND
DEVELOPMENT COMPANY
(A Colorado Corporation)
(SEAL)
ATTEST: By /s/ Stephen M. Siedow
------------------------------
Stephen M. Siedow, President
By /s/ Elisabeth M. Crosse
--------------------------------
Secretary or Assistant Secretary
(SEAL)
3
<PAGE>
VERIFICATION
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 2nd day of April, 1999, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Stephen M. Siedow, who being duly sworn, declared that he is
the President of GALLAGHER RESEARCH CORPORATION, a Nevada corporation, that he
executed the foregoing Articles and Certificate of Merger as the free act and
deed of such corporation, and that he has signed his name thereto by order of
the Board of Directors of such corporation.
X /s/ Jennifer S. Myers
----------------------- My Commission Expires:
Notary Public October 22, 2001
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 2nd day of April, 1999, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Stephen M. Siedow, who being duly sworn, declared that he is
the President of GALLAGHER RESEARCH AND DEVELOPMENT COMPANY, a Colorado
corporation, that he executed the foregoing Articles and Certificate of Merger
as the free act and deed of such corporation, and that he has signed his name
thereto by order of the Board of Directors of such corporation.
X /s/ Jennifer S. Myers
----------------------- My Commission Expires:
Notary Public October 22, 2001
(SEAL)
4
<PAGE>
VERIFICATION
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 2nd day of April, 1999, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Elisabeth M. Crosse, who being duly sworn, declared that she
is the Assistant Secretary of GALLAGHER RESEARCH CORPORATION a Nevada
corporation, that she executed the foregoing Articles and Certificate of Merger
as the free act and deed of such corporation, and that she has signed her name
thereto by order of the Board of Directors of such corporation.
X /s/ Jennifer S. Myers
---------------------- Commission Expires:
Notary Public October 22, 2001
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 2nd day of April, 1999, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Elisabeth M. Crosse, who being duly sworn, declared that she
is the Assistant Secretary of GALLAGHER RESEARCH AND DEVELOPMENT COMPANY, a
Colorado corporation, that she executed the foregoing Articles and Certificate
of Merger as the free act and deed of such corporation, and that she has signed
her name thereto by order of the Board of Directors of such corporation.
X /s/ Jennifer S. Myers
----------------------- Commission Expires:
Notary Public October 22, 2001
(SEAL)
5
<PAGE>
EXHIBIT A
MERGER AGREEMENT
of
GALLAGHER RESEARCH CORPORATION
(A Nevada Corporation)
and
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
(A Colorado Corporation)
This Merger Agreement, dated as of April 2, 1999, is entered into pursuant
to the provisions of Section 92A.190 of the General Corporation Law of Nevada
and of Section 7-111-107 of the Colorado Business Corporation Act, by and
between GALLAGHER RESEARCH CORPORATION, a Nevada corporation (the "Survivor"),
and GALLAGHER RESEARCH AND DEVELOPMENT COMPANY, a Colorado corporation (the
"Assimilated"), both corporations being sometimes referred to herein as the
"Constituent Corporations."
RECITALS:
A. Survivor is a corporation duly organized and existing under the laws of
the State of Nevada and has an authorized capital of 55,000,000 shares, of which
50,000,000 shares are designated as common stock, par value $.001, of which 100
shares are outstanding, and of which 5,000,000 shares are designated as
preferred shares, $.001 par value, none of which have been issued or are
outstanding.
B. Assimilated is a corporation duly organized and existing under the laws
of the State of Colorado and has an authorized capital of 55,000,000 shares,
$.0001 par value, of which 50,000,000 shares are designated as Common Stock and
of which 5,000,000 shares are designated as Preferred Stock. A total of 298,000
shares of Common Stock are issued and outstanding. No preferred shares have been
issued or are outstanding.
C. The respective Boards of directors of Survivor and Assimilated have
approved this Agreement and have directed that this Agreement be submitted to a
vote of their respective shareholders.
Now, therefore, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, Survivor and
Assimilated hereby agree, subject to the terms and conditions hereinafter set
forth, as follows:
ARTICLE I. MERGER.
1.1 Merger and Name Change. In accordance with the provisions of this
Agreement, the General Corporation Law of Nevada, and the Colorado Business
Corporation Act, Assimilated shall be merged with and into Survivor (the
"Merger"), and the name of the surviving corporation shall be GALLAGHER RESEARCH
CORPORATION.
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved
by the shareholders of each Constituent Corporation in accordance with the
respective requirements of the General Corporation Law of Nevada and the
Colorado Business Corporation Act.
(b) An executed counterpart of this Agreement shall have been filed
with the Secretary of State of the State of Nevada; and
1
<PAGE>
(c) Executed Articles of Merger or other documents meeting the
requirements of the Colorado Business Corporation Act shall have been filed with
the Secretary of State of the State of Colorado.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date."
1.3 Certificate of Incorporation. The Certificate of Incorporation of
Survivor as in effect immediately prior to the Effective Date shall continue in
full force and effect as the Certificate of Incorporation of the Survivor until
duly amended in accordance with the provisions thereof and applicable law.
1.4 Bylaws. The Bylaws of Survivor as in effect immediately prior to the
Effective Date shall continue in full force and effect as the Bylaws of the
Survivor without any change as a result of the Merger.
1.5 Directors and Officers. The directors and officers of Survivor in
office immediately prior to the Effective Date shall continue in office and
shall constitute the directors and officers of Survivor until their respective
successors shall have been elected and duly qualified or until otherwise
provided by law, the Certificate of Incorporation of Survivor and the Bylaws of
Survivor.
1.6 Effect of Merger. Upon the Effective Date, the separate existence of
Assimilated shall cease and the Survivor (i) shall continue to possess all of
the assets, rights, powers and property of Survivor as constituted immediately
prior to the Effective Date, shall be subject to all actions previously taken by
the Board of Directors of Assimilated and shall succeed, without other transfer,
to all of the assets, rights, powers and property of Assimilated, (ii) shall
continue to be subject to all of the debts, liabilities and obligations of
Assimilated as constituted immediately prior to the Effective Date and shall
succeed, without other transfer, to all of the debts, liabilities and
obligations of Assimilated in the same manner as if Survivor had itself incurred
them, all as more fully provided under the applicable provisions of the General
Corporation Law of Nevada and the Colorado Business Corporation Act.
ARTICLE II. MANNER OF CONVERSION OF COMMON STOCK.
2.1 Assimilated Common Stock. Upon the Effective Date, each share of common
stock, $.0001 par value, of Assimilated issued and outstanding immediately prior
thereto shall, by virtue of the Merger and without any action by any holder of
such shares or any other person, be converted into and exchanged for one (1)
fully paid and nonassessable share of Common Stock, $.001 par value, of Survivor
(the "Merger Shares").
2.2 Outstanding Common Stock of Survivor. Upon the Effective Date, each
share of the 100 shares of Common Stock of Survivor issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by the holder of such shares or any other person, be cancelled and returned to
the status of authorized but unissued shares.
2.3 Exchange of Certificates. On or after the Effective Date of the Merger:
(a) All of the outstanding certificates which prior to that time
represented the outstanding Common Shares of Assimilated shall be deemed for all
purposes to evidence ownership of and to represent the Merger Shares into which
the shares of Assimilated represented by such certificates have been converted
as herein provided. The registered owner on the books and records of Assimilated
or its transfer agent of any such outstanding stock certificate shall, until
such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to Survivor or its transfer agent, have and be entitled
to exercise any voting and other rights with respect to and to receive any
dividend and other distributions upon the Merger Shares evidenced by such
outstanding certificate as above provided.
2
<PAGE>
(b) Each certificate evidencing Merger Shares issued in the Merger
shall bear the same legends, if any, with respect to the restrictions on
transferability as the certificates of Assimilated so converted and given in
exchange therefor, unless otherwise determined by the Board of Directors of
Survivor in compliance with applicable laws.
(c) If any certificate for Merger Shares is to be issued in a name
other than that in which the certificate surrendered in exchange therefor is
registered, it shall be a condition of issuance thereof that the certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay any transfer or other taxes payable by reason of the issuance
of such new certificate in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of Survivor that
such tax has been paid or is not payable.
2.4 Assumption of Benefit Plans. Upon the Effective Date, Survivor shall
assume and continue both the 1997 Compensatory Stock Option Plan and the 1997
Employee Stock Compensation Plan of Assimilated, without change other than
conforming changes in the corporate name, par value of common stock, governing
law and similar non-substantive changes. Survivor and its Board of Directors
shall have the same rights and powers in regard to such plans as Assimilated and
its Board of Directors.
ARTICLE III. GENERAL MATTERS.
3.1 Covenants of Survivor. Survivor covenants and agrees that it will, on
or before the Effective Date:
(a) Qualify to do business as a foreign corporation in all states
wherein its operations require it to qualify under applicable state laws.
(b) File all documents with the franchise tax authorities of the State
of Colorado necessary to the assumption by Survivor of all of the franchise tax
liabilities of Assimilated.
(c) Take such other actions as may be required by the Colorado Business
Corporation Act or other applicable law.
3.2 Abandonment. At any time before the Effective Date, this Agreement may
be terminated and the Merger abandoned for any reason whatever by the Board of
Directors of Survivor or Assimilated, or both, notwithstanding the approval of
this Agreement and Merger by the shareholders of Assimilated or Survivor or
both.
3.3 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or a
certificate in lieu thereof) with the Secretary of State of the State of Nevada,
provided that an amendment made subsequent to the adoption of this Agreement by
the shareholders of either Constituent Corporation shall not (i) alter or change
the amount or kind of Merger Shares to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation, (ii) alter or change any term of the Certificate of
Incorporation of the Survivor to be effected by the Merger, or (iii) alter or
change any of the terms and conditions of this Agreement if such alteration or
change would adversely affect the holders of any class or series thereof of such
Constituent Corporation.
3
<PAGE>
3.4 Expenses. Survivor shall pay all costs related to the Merger and
necessary filings and actions in connection therewith.
3.5 Mutual Covenants of Constituent Corporations. Survivor and Assimilated
each agree that, between the date hereof and the Effective Date, it will not (i)
enter into any employment contracts, (ii) grant any options, warrants or similar
rights (nor any instrument or security containing such an option, warrant or
similar right) exercisable for, exchangeable for or convertible into its common
shares or other securities, (iii) issue any stock or other securities, including
debt instruments, or (iv) declare or pay any dividends in stock or cash or make
any other distribution on or with respect to its outstanding common stock.
Either party may but need not abandon the Merger if the holders of more than 5%
of the outstanding shares of Assimilated should dissent from the Merger.
3.6 Registered Office. The Registered Office of the Survivor in the State
of Nevada is located at 2533 North Carson Street, Carson City, Nevada 89706, and
Laughlin Associates, Inc. is the Resident Agent of the Survivor at such address.
3.7 Further Actions. If at any time Survivor shall consider or be advised
that any further assignment or assurances in law are necessary or desirable to
vest or to perfect or confirm of record in Survivor the title to any property or
rights of Assimilated, or to otherwise carry out the provisions of this
Agreement, then the proper officers and directors of Assimilated as of the
Effective Date shall execute and deliver to Survivor any and all proper deeds,
assignments and assurances in law, and do all things necessary or proper to
vest, perfect or confirm title to such property or rights in Survivor.
3.8 Governing Law. This Agreement shall in all respects be interpreted and
enforced in accordance with and governed by the laws of the State of Colorado.
3.9 Counterparts. In order to facilitate the filing and recording of this
Agreement, it may be executed in any number of counterparts, each of which shall
be deemed to be an original.
3.10 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of Survivor located at 90 Madison Street, Suite 707,
Denver, Colorado 80206, and copies thereof will be furnished to any shareholder
of any Constituent Corporation upon request and without cost.
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolution of the Boards of Directors Assimilated and survivor, is hereby
executed on behalf of each of such corporations and attested by their respective
officers thereto duly authorized.
GALLAGHER RESEARCH CORPORATION
(A Nevada Corporation)
ATTEST: By /s/ Stephen M. Siedow
------------------------------
Stephen M. Siedow, President
By /s/ Elisabeth M. Crosse
-------------------------------------
Secretary or Assistant Secretary
4
<PAGE>
GALLAGHER RESEARCH
AND DEVELOPMENT COMPANY
(A Colorado Corporation)
ATTEST: By /s/ Stephen M. Siedow
------------------------------
Stephen M. Siedow, President
By /s/ Elisabeth M. Crosse
-------------------------------------
Secretary or Assistant Secretary
Exhibit 2.2
STOCK EXCHANGE AGREEMENT
This Agreement is entered into as of October 9, 1998, among GALLAGHER
RESEARCH & DEVELOPMENT COMPANY, a Colorado corporation (the "Company"); GRDC,
INC., a Colorado corporation ("GRDC"); and Alton V. Gallagher, Rodney M.
Gallagher, James M. Fausnaugh, Douglas Gallagher, Brian Gallagher, Brenda
Gallagher, Karin Crowther, Denise Spencer and Eleanor M. Gallagher who are
shareholders of the Company (collectively, the "Shareholders").
RECITALS:
A. The common stock of the Company, no par value, is quoted on the OTC
Bulletin Board maintained by the National Association of Securities Dealers,
Inc. under symbol "GRDC." However, the common stock of the Company is not
actively traded and there is no market for the common stock.
B. Pursuant to that certain Agreement and Plan of Merger, MNS Eagle Equity
Group V, Inc., a Nevada corporation ("MNS") was merged into the Company
effective on January 21, 1998 (the "Merger"), pursuant to an Agreement and Plan
of Merger dated December 12, 1997 (the "Merger Agreement"); and as part of the
Merger, the Company issued to the shareholders of MNS an aggregate of 273,000
shares of the Company's common stock. Following the Merger, the Shareholders own
an aggregate of 1,200,000 shares of the common stock of the Company (the
"Control Shares"), as reflected on SCHEDULE A to this Agreement.
C. Pursuant to that certain Assignment and Indemnity Agreement dated June
8, 1998, the Company transferred all of its assets and liabilities to GRDC, its
wholly owned subsidiary, which also assumed all liabilities whatever of the
Company, and the Company owns all of the 10,000 shares of common stock, no par
value, of GRDC issued and outstanding (the "GRDC Shares").
D. The principal motivation of the Company in entering into the Merger and
becoming publicly held was to enhance the Company's ability to raise capital and
to create liquidity in its common stock, among other things; however, due to the
volatility of the stock markets, the Company's posture as a public company has
been frustrated by the lack of a market in the Company's stock, resulting in
consequent inability to raise capital.
E. The Shareholders, who were the principal owners of the Company prior to
the Merger, now wish to exchange substantially all of the Control Shares for the
GRDC Shares in order to obtain complete ownership of GRDC, INC. and operate it
as a privately held company; and the Board of Directors of the Company has no
objection to such exchange.
Page 1
<PAGE>
NOW THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties set forth below, the parties agree that:
1. The Exchange of Shares. It is the desire of the Shareholders and of the
Board of Directors of the Company that the Shareholders and the Company enter
into an exchange of shares (the "Exchange") in which the Shareholders shall
transfer to the Company an aggregate of 1,175,000 of the Control Shares (the
"Exchange Shares") in exchange for the Company's transfer to them on a ratable
basis of all the GRDC Shares. On the effective date of the Exchange, the
following shall occur:
(a) All certificates evidencing the Control Shares shall be surrendered by
the Shareholders to the Company for cancellation, which certificates shall
either be signed for transfer on the reverse side or shall be accompanied by
signed stock powers, in each case signed in the exact name in which the
certificate is registered; upon receiving such certificates the 1,175,000
Exchange Shares comprising part of the Control Shares shall be cancelled on the
transfer books of the Company and resume the status of authorized and unissued
shares. The number of Exchange Shares being transferred to the Company by each
Shareholder is reflected on SCHEDULE A to this Agreement.
(b) Certificates evidencing the 25,000 Control Shares not being cancelled
or exchanged but being retained by the Shareholders (the "Balance Shares") shall
be issued by the Company at Closing to the Shareholders in the respective
denominations reflected on SCHEDULE A to this Agreement, based upon percentage
of ownership of the Control Shares; only one certificate to be issued to each
Shareholder. Each certificate issued evidencing Balance Shares shall be subject
to the same restrictions on transfer and other limitations, if any, as the
Control Shares submitted for cancellation; except that, if a Shareholder owns
both restricted and unrestricted shares, the Shareholder shall be deemed to
retain the unrestricted shares as Balance Shares. However, if the number of
unrestricted shares owned by a Shareholder is less than the number of Balance
Shares being retained, the Shareholder shall receive two certificates, one
unrestricted and the other containing the same restrictions to which the
restricted shares now are subject.
(c) The issued and outstanding certificates registered in the Company's
name and evidencing the GRDC Shares shall be cancelled on the books of GRDC, and
the GRDC Shares shall be reissued in the names of and delivered to the
Shareholders in the respective denominations reflected on SCHEDULE A to this
Agreement. The GRDC Shares have not been registered under the Securities Act of
1933, as amended ("Act"), and each certificate evidencing GRDC Shares shall bear
a customary form of investment legend restricting transfer thereof except upon
registration under the Act or pursuant to an available exemption from such
registration requirements.
2. Effect of This Transaction. The effect of this transaction shall be to
transfer ownership of GRDC from the Company to the group of Shareholders, thus
restoring to them the ownership of the business now owned and operated in GRDC,
and to cancel all of the Control Shares except the Balance Shares.
Page 2
<PAGE>
3. Shareholder Approval. As soon as reasonably practical, the Secretary of
the Company shall call a special meeting of the shareholders of the Company to
consider and vote upon the Exchange. The vote requirement shall be that imposed
by Colorado law in regard to bulk sales of corporate assets. If shareholder
approval is duly obtained at such meeting, this Agreement and the transactions
herein contemplated shall be promptly closed following that meeting and all
deliveries made as herein called for.
4. Waiver of Damages or Compensation.
(a) GRDC and the Shareholders all and severally forever waive the right
to claim any money or other damages or recompense of any kind whatsoever from
the Company based upon, and each and severally acknowledge and agree that he,
she or it has not suffered any money or other damages as a result of, the Merger
or any breach or alleged breach of the Merger Agreement, the failure or alleged
failure of any of the Company's representations or warranties set forth in the
Merger Agreement, or in connection with this Agreement and the transactions
herein contemplated. However, nothing herein shall relieve GRDC from any of its
obligations or liabilities assumed or existing under the Assignment and
Indemnity Agreement, or from any obligations that may exist due to the failure
of any warranty or representation made by GRDC in the Assignment and Indemnity
Agreement.
(b) The Company forever waives the right to claim any money or other
damages or recompense of any kind whatsoever from GRDC or any of the
Shareholders based upon, and acknowledges and agrees that it has not suffered
any money or other damages as a result of, any breach or alleged breach of the
Merger Agreement by them or any of them, or in connection with this Agreement
and the transactions herein contemplated.
(c) By transferring and surrendering the Exchange Shares to the Company,
the Shareholders forever waive any increase in value which might accrue to them
as a result of any increase in the value or market price of the shares of
capital stock of the Company. By transferring the GRDC Shares to the
Shareholders, the Company forever waives any equity interest or other right or
interest whatsoever in or to GRDC, including any increase in value which the
shares of capital stock of GRDC may ever undergo.
5. Representations and Warranties. The following representations and
warranties of the parties shall survive the Closing.
(a) The Company represents and warrants that, since transferring its
assets and liabilities to GRDC pursuant to the Assignment and Indemnity
Agreement, it has not had operations or done any business other than to act as
the parent and holding company of GRDC and to perform such acts as are required
by law.
Page 3
<PAGE>
(b) The Company represents and warrants that there are now and at
Closing immediately prior to consummation of this Agreement there will be
1,473,000 shares of its common stock issued and outstanding, and the Company has
not issued any shares convertible into or exchangeable for its capital stock, or
any option or other right entitling any person to acquire shares of its capital
stock.
(c) The Company and GRDC represent and warrant that there are now and
will be at Closing an aggregate of 10,000 shares of GRDC's common stock issued
and outstanding, and that there are not now issued or outstanding any shares
convertible into or exchangeable for GRDC's capital stock, or any option or
other right entitling any person to acquire shares of GRDC's capital stock.
(d) The Company represents and warrants to the Shareholders that the
GRDC Shares being transferred to the Shareholders are free and clear of any
claim of a third party, or any lien, claim or other encumbrance whatsoever.
(e) The Company represents and warrants to the Shareholders that there
are no claims, actions, suits, proceedings or investigations pending or
threatened against or affecting GRDC or the Company in any court or by or before
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or other instrumentality, domestic or foreign, or
arbitration tribunal or other forum.
(f) The Company represents and warrants to the Shareholders that the
Company and GRDC have no obligations or debts of any kind, contingent or direct,
except as respectively shown on the balance sheets of the Company and GRDC dated
as of September 30, 1998.
(g) Each Shareholder represents and warrants to the Company that the
Exchange Shares being transferred to the Company are free and clear of any claim
or ownership rights of a third party, or any lien, claim or other encumbrance
whatsoever, except for spousal rights created by law, and that he or she has
full power and authority to transfer and deliver the Exchange Shares as herein
called for.
(h) Each Shareholder represents and warrants to the Company that the the
financial condition and results of operations of the Company are accurately
reflected on the Company's balance sheet as of September 30, 1998 and its other
financial statements for the nine months ended September 30, 1998, and that the
Company has no obligations or debts of any kind, contingent or direct, except as
shown on the balance sheet of the Company dated as of September 30, 1998.
(i) Each Shareholder represents and warrants to the Company that the the
financial condition and results of operations of GRDC are accurately reflected
on its balance sheet as of September 30, 1998 and its other financial statements
for the period ended September 30, 1998, and that GRDC has no obligations or
debts of any kind, contingent or direct, except as shown on the balance sheet of
GRDC dated as of September 30, 1998.
Page 4
<PAGE>
(j) Each Shareholder represents and warrants to the Company that he or
she, as the case may be, is not owed any salary or other compensation whatever,
is not owed any expense reimbursements, and is not owed any stock or other
rights in or to the Company.
(k) The Shareholders represent and warrant to the Company that no one
other than Shareholders are officers or directors of the Company or have any
operational or day-to-day responsibilities for the Company, and that the
representations of the Company herein are true and correct.
6. Resignations of Officers and Directors, Etc. At the Closing, the
existing officers and directors of the Company shall tender their resignations
as officers and directors, which resignations shall state that the resigning
persons are not owed any compensation, expense reimbursements or stock of any
kind, and the following persons shall be elected as the officers and directors
of the Company:
Stephen M. Siedow DIRECTOR, President, CEO
7. Reliance by Transfer Agent. Every current and future transfer agent and
registrar of the Company's common stock may rely upon this Agreement as
authority for the cancellation of the Exchange Shares and their return to the
status of authorized and unissued shares.
8. Closing. Closing of the transactions herein contemplated shall occur and
all required deliveries shall be made as soon as possible after the approval of
the Company's shareholders is duly obtained. At the Closing:
(a) The Shareholders shall surrender and transfer the Exchange Shares
to the Company as called for in Paragraph 1 hereof;
(b) The Company shall issue the Balance Shares to the Shareholders as
called for in Paragraph 1 hereof;
(c) The Company shall cancel the GRDC Shares registered in its name
and reissue them to the Shareholders as called for in Paragraph 1
hereof;
(d) The existing officers and directors of the Company shall resign,
and the proper persons shall be elected as the officers and
directors of the Company, as called for in Paragraph 6 hereof;
Page 5
<PAGE>
9. Miscellaneous Provisions.
(a) Notices. Every notice, request and instruction required or permitted
under this Agreement shall be in writing and, except as otherwise permitted
herein, shall be delivered by registered or certified mail, telegram or cable,
overnight air courier or other messenger service which requires the receiver's
signature and regularly retains its delivery receipts, or by personal delivery,
if to a Shareholder, in care of GRDC, and if to the Company or to GRDC, then as
follows:
If to GRDC: 1576 South Robb Way
Lakewood, Colorado 80232
If to the Company 1576 South Robb Way
prior to Closing: Lakewood, Colorado 80232
If to the Company 12373 East Cornell Avenue
after the Closing: Aurora, Colorado 80014
or to any subsequent address provided by a party or such other persons in
accordance with this Paragraph.
(b) Expenses. Each party shall bear its own costs and expenses in
connection with this Agreement, and no party shall be liable to any other party
for any costs or expenses incurred in connection with this Agreement.
(c) Benefit. This Agreement shall be binding upon and inure to the
benefit of the Company and GRDC and the Shareholders, and their respective
heirs, successors, assigns and legal representatives. The Shareholders
acknowledge that other persons who subsequently control or own shares of the
Company will be relying upon the representations and warranties of the
Shareholders contained herein.
(d) Governing Law; etc. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado and shall be
interpreted as if all parties participated equally in its drafting. Headings
appearing in this Agreement are employed for convenience of reference only and
shall not be considered in interpreting this Agreement.
(e) Amendment; Entire Agreement. This Agreement may not be amended or
supplemented except by an agreement in writing signed by the Company, GRDC and
all the Shareholders. However, once this Agreement has been approved by the
shareholders of the Company, no amendment shall alter or change the number of
Exchange or Balance Shares, or otherwise materially alter or change any of the
terms or conditions of this Agreement. This Agreement contains the entire
agreement between the parties.
Page 6
<PAGE>
(f) Severability. In the event any provision of this Agreement is deemed
to be unenforceable for any reason, such provision shall not invalidate the
remaining portion of this Agreement, which if possible shall be enforced as if
such unenforceable provision never were written.
(g) Waiver. Any party may waive the satisfaction of any one or more
conditions precedent to its obligations hereunder and may waive any other rights
hereunder. Any such waiver shall be in writing, signed by the party or the
president of the party making the waiver and shall clearly identify the
condition precedent or other right being waived. No such waiver shall operate as
a subsequent waiver of any other condition precedent or other right.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
(i) Further Actions. If at any time the Company or GRDC shall consider
or be advised that any further assurances in law are necessary or desirable to
effect the Exchange or to perfect or confirm title or ownership to the GRDC
Shares or Exchange Shares, or to otherwise carry out the provisions of this
Agreement, then the proper officers and directors of the Company or GRDC as the
case may be or any Shareholder upon request shall execute and deliver to the
requesting party any and all such assignments and assurances in law, and do all
things necessary or proper to effect the Exchange or to perfect or confirm
title.
(j) No Advice Given. The Survivors and GRDC acknowledge and agree that
they have not sought or received any legal or tax advice desired in relation to
the proposed Exchange and other transactions contemplated in this Agreement from
the Company or any person associated with the Company, but have instead relied
on advice and counsel furnished by their own legal, tax, accounting or other
advisers in order to satisfy themselves as to the tax and other legal
implications to them of the Exchange and other transactions contemplated herein.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
and have initialled every preceding page effective as of the date first above
written.
GALLAGHER RESEARCH & GRDC, INC.
DEVELOPMENT COMPANY
By /s/ Alton V. Gallagher By /s/ Alton V. Gallagher
----------------------------- -----------------------------
Alton V. Gallagher, President Alton V. Gallagher, President
Page 7
<PAGE>
SHAREHOLDERS' SIGNATURE PAGE
to
STOCK EXCHANGE AGREEMENT
Dated October 9, 1998
Alton V. Gallagher Rodney M. Gallagher
X /s/ Alton V. Gallagher X /s/ Rodney M. Gallagher
------------------------------- -----------------------------------
Signature Signature
James M. Fausnaugh Douglas Gallagher
X /s/ James M. Fausnaugh X /s/ Douglas Gallagher
------------------------------- ----------------------------------
Signature Signature
Brian Gallagher Brenda Gallagher
X /s/ Brian Gallagher X /s/ Brenda Gallagher
------------------------------- -----------------------------------
Signature Signature
Karin Crowther Denise Spencer
X /s/ Karin Crowther X /s/ Denise Spencer
------------------------------- -----------------------------------
Signature Signature
Eleanor M. Gallagher
X /s/ Eleanor M. Gallagher
-------------------------------
Signature
Page 8
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
to
STOCK EXCHANGE AGREEMENT Dated October 9, 1998
Among Gallagher Research & Development Company,
GRDC, INC., and certain individuals
No. of No. of No. of No. of
Control Exchange Balance GRDC
Shareholder Name Shares Shares Shares Shares
- -------------------- ------- -------- ------- ------
<S> <C> <C> <C> <C>
Rodney M. Gallagher 120,000 117,500 2,500 1,000
James M. Fausnaugh 120,000 117,500 2,500 1,000
Douglas Gallagher 5,000 4,896 104 41
Brian Gallagher 5,000 4,896 104 41
Brenda Gallagher 5,000 4,896 104 42
Karin Crowther 5,000 4,896 104 42
Denise Spencer 5,000 4,896 104 42
Alton V. Gallagher 470,000 460,208 9,792 3,917
Eleanor M. Gallagher 465,000 455,312 9,688 3,875
--------- --------- --------- ---------
TOTALS 1,200,000 1,175,000 25,000 10,000
========= ========= ========= =========
Page 9
</TABLE>
<PAGE>
ACKNOWLEDGMENT
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Alton V. Gallagher, known to me to be the President of GALLAGHER RESEARCH AND
DEVELOPMENT CO., a Colorado corporation, who after being duly sworn declared
that he executed the foregoing Stock Exchange Agreement as his free act and
deed, and that the statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------- Commission Expires: 12/8/98
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Alton V. Gallagher, known to me to be the President of GRDC, Inc., a Colorado
corporation, who after being duly sworn declared that he executed the foregoing
Stock Exchange Agreement as his free act and deed, and that the statements
therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------ Commission Expires: 12-8-98
Notary Public
(SEAL)
Page 10
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Alton V. Gallagher, who after being duly sworn declared that he/she executed the
foregoing Stock Exchange Agreement as his/her free act and deed, and that the
statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------- Commission Expires: 12/8/98
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
James M. Fausnaugh, who after being duly sworn declared that he/she executed the
foregoing Stock Exchange Agreement as his/her free act and deed, and that the
statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby Commission Expires: 12/8/98
-------------------------------
Notary Public
(SEAL)
Page 11
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Eleanor M. Gallagher, who after being duly sworn declared that he/she executed
the foregoing Stock Exchange Agreement as his/her free act and deed, and that
the statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------ Commission Expires: 12-8-98
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Rodney M. Gallagher, who after being duly sworn declared that he/she executed
the foregoing Stock Exchange Agreement as his/her free act and deed, and that
the statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------- Commission Expires: 12-8-98
Notary Public
(SEAL)
Page 12
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Brian Gallagher, who after being duly sworn declared that he/she executed the
foregoing Stock Exchange Agreement as his/her free act and deed, and that the
statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------ Commission Expires: 12-8-98
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Karin Crowther, who after being duly sworn declared that he/she executed the
foregoing Stock Exchange Agreement as his/her free act and deed, and that the
statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------ Commission Expires: 12-8-98
Notary Public
(SEAL)
Page 13
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Brenda Gallagher, who after being duly sworn declared that he/she executed the
foregoing Stock Exchange Agreement as his/her free act and deed, and that the
statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------ Commission Expires: 12-8-98
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Denise Spencer, who after being duly sworn declared that he/she executed the
foregoing Stock Exchange Agreement as his/her free act and deed, and that the
statements therein set forth are true and correct.
Sworn to and Subscribed on October 10, 1998.
X /s/ Duane Ruby
------------------------------ Commission Expires: 12-8-98
Notary Public
(SEAL)
Page 14
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
Douglas Gallagher, who after being duly sworn declared that he/she executed the
foregoing Stock Exchange Agreement as his/her free act and deed, and that the
statements therein set forth are true and correct.
Sworn to and Subscribed on October 17, 1998.
X /s/ Madonna J. Buss
------------------------------ Commission Expires: 9-10-2001
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF __________ )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above stated jurisdiction, personally came and appeared
_______________, who after being duly sworn declared that he/she executed the
foregoing Stock Exchange Agreement as his/her free act and deed, and that the
statements therein set forth are true and correct.
Sworn to and Subscribed on October __ , 1998.
X Commission Expires:
-------------------------------
Notary Public
(SEAL)
Page 15
Exhibit 2.3
ARTICLES AND CERTIFICATE OF MERGER
of
MNS EAGLE EQUITY GROUP V, INC.
(A Nevada Corporation)
into
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
(A Colorado Corporation)
Pursuant to Section 7-111-107 of the Colorado Business Corporation Act and
Section 92A.190 of the Nevada General Corporation Law, the two undersigned
corporations (the "Constituent Corporations") adopt the following Articles and
Certificate of Merger for the purpose of merging them into one corporation (the
"Merger"), and each corporation hereby certifies to the information below with
respect to the Merger:
FIRST: The names and state of incorporation of the two Constituent
Corporations effecting the Merger are:
Name Domicile Status
---- -------- ------
GALLAGHER RESEARCH
AND DEVELOPMENT COMPANY..............Colorado...........Surviving Corporation
MNS EAGLE EQUITY GROUP V, INC..........Nevada............Assimilated Corporation
SECOND: The name of the Surviving Corporation in the Merger shall be
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY. Section 7-111-107 of the Colorado
Business Corporation Act and Section 92A.190 of the Nevada General Corporation
Law permit this Merger. The Surviving Corporation has authorized 50,000,000
common shares, $.0001 par value, of which 1,200,000 shares are issued and
outstanding, and 5,000,000 preferred shares, $.0001 par value, none of which
have been issued or are outstanding. The Assimilated Corporation has authorized
50,000,000 common shares, $.001 par value, 682,500 of which are issued and
outstanding, and 5,000,000 preferred shares, $.001 par value, none of which have
been issued or are outstanding.
THIRD: The Merger shall not effect any change in the Certificate of
Incorporation of the Surviving Corporation as in effect on the date these
Articles and Certificate of Merger are duly filed with the respective
Secretaries of State of the States of Nevada and Colorado.
FOURTH: A copy of the Merger Agreement dated December 12, 1997, setting
forth the terms and conditions of the Merger and of the manner of converting the
outstanding securities of the Assimilated Corporation into securities of the
Surviving Corporation, is appended in the form executed to these Articles and
Certificate of Merger as Exhibit A and is herein fully incorporated by
reference, and will be furnished to any shareholder of a Constituent
Corporation, without charge, who so requests.
FIFTH: The Merger Agreement has been approved and adopted by the respective
boards of directors of the Constituent Corporations and certified, executed and
acknowledged by each of the Constituent Corporations in the manner prescribed by
the respectively applicable laws of Nevada and Colorado.
SIXTH: The Merger Agreement was duly approved, as follows:
(a) by the shareholders of the Assimilated Corporation on December 16,
1997, 1997, voting 582,605 shares FOR and -0- AGAINST, out of a total of
682,500 voting shares issued and outstanding entitled to vote thereon, all
of a class, a number sufficient for approval; and
1
<PAGE>
(b) by the shareholders of the Surviving Corporation on December 16, 1997,
voting 1,200,000 shares FOR and -0- AGAINST, out of a total of 1,200,000
voting shares issued and outstanding entitled to vote thereon, all of a
class, a number sufficient for approval.
SEVENTH: An executed Merger Agreement is on file at the principal place of
business of the Surviving Corporation, which is located at 1576 S. Robb Way,
Lakewood, Colorado 80232, and a copy thereof will be furnished without charge to
any shareholder of a Constituent Corporation who so requests.
EIGHTH: The Registered Office of the Surviving Corporation in the State of
Colorado is located at 1576 S. Robb Way, Lakewood, Colorado 80232, and the
Registered Agent at such address is Alton V. Gallagher.
NINTH: The Surviving Corporation in this Merger by execution and the due
filing of these Articles of Merger hereby agrees that it:
(a) may be served with process in the State of Nevada in any proceeding for
the enforcement of any obligation of the Assimilated Corporation and in any
proceeding for the enforcement of the rights of any dissenting shareholder
of the Assimilated Corporation against the Surviving Corporation;
(b) irrevocably appoints the Secretary of the Department of State of the
State of Nevada as its agent to accept service of process in any such
proceeding brought against the Assimilated Corporation in the State of
Nevada, which should be served on the Surviving Corporation at the address
set forth in Article SEVENTH above; and
(c) will promptly pay to the dissenting shareholders, if any, of the
Assimilated Corporation the amount, if any, to which they are entitled
under the provisions of the General Corporation Law of Nevada with respect
to the rights of dissenting shareholders.
TENTH: The Merger shall be effective when these Articles of Merger are duly
filed for recordation with the office of the Secretary of State of the State of
Colorado.
IN WITNESS WHEREOF, these Articles and Certificate of Merger have been duly
executed as of the date set forth below by the authorized officers of the
Constituent Corporations.
Dated: December 16, 1997
GALLAGHER RESEARCH AND
DEVELOPMENT COMPANY
(A Colorado Corporation)
ATTEST:
By /s/ Alton V. Gallagher
------------------------------
Alton V. Gallagher, President
2
<PAGE>
By /s/ Rodney M. Gallagher
-----------------------------------
Rodney M. Gallagher, Secretary
MNS EAGLE EQUITY GROUP V, INC.
(A Nevada Corporation)
(SEAL)
ATTEST: By /s/ Stephen M. Siedow
------------------------------
Stephen M. Siedow, President
By /s/ John D. Brasher Jr.
------------------------------
John D. Brasher Jr., Secretary
(SEAL)
3
<PAGE>
VERIFICATION
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
On this 23th day of December, 1997, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Alton V. Gallagher, who being duly sworn, declared that he is
the President of GALLAGHER RESEARCH AND DEVELOPMENT COMPANY, a Colorado
corporation, that he executed the foregoing Articles and Certificate of Merger
as the free act and deed of such corporation, and that he has signed his name
thereto by order of the Board of Directors of such corporation.
X /s/ Donna Smerchek
------------------- Commission Expires:
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 16th day of December, 1997, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Stephen M. Siedow, who being duly sworn, declared that he is
the President of MNS EAGLE EQUITY GROUP V, INC., a Nevada corporation, that he
executed the foregoing Articles and Certificate of Merger as the free act and
deed of such corporation, and that he has signed his name thereto by order of
the Board of Directors of such corporation.
X /s/ Elisabeth M. Crosse
------------------------ Commission Expires:
Notary Public
(SEAL)
4
<PAGE>
VERIFICATION
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
On this 23th day of December, 1997, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared Rodney M. Gallagher, who being duly sworn, declared that he is
the Secretary of GALLAGHER RESEARCH AND DEVELOPMENT COMPANY, a Colorado
corporation, that he executed the foregoing Articles and Certificate of Merger
as the free act and deed of such corporation, and that he has signed his name
thereto by order of the Board of Directors of such corporation.
X /s/ Donna Smerchek
------------------- Commission Expires:
Notary Public
(SEAL)
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
On this 16th day of December, 1997, before me, a Notary Public duly
commissioned and qualified in and for the above stated jurisdiction, personally
came and appeared John D. Brasher Jr., who being duly sworn, declared that he is
the Secretary of MNS EAGLE EQUITY GROUP V, INC., a Nevada corporation, that he
executed the foregoing Articles and Certificate of Merger as the free act and
deed of such corporation, and that he has signed his name thereto by order of
the Board of Directors of such corporation.
X /s/ Elisabeth M. Crosse
------------------------ Commission Expires:
Notary Public
(SEAL)
5
<PAGE>
EXHIBIT A
MERGER AGREEMENT
of
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
(A Colorado Corporation)
and
MNS EAGLE EQUITY GROUP V, INC.
(A Nevada Corporation)
This Merger Agreement, dated as of December 12, 1997, is entered into
pursuant to the provisions of Section 7-111-107 of the Colorado Business
Corporation Act and Section 92A.190 of the General Corporation Law of Nevada, by
and between GALLAGHER RESEARCH AND DEVELOPMENT COMPANY, a Colorado corporation
(the "Survivor"), and MNS EAGLE EQUITY GROUP V, INC., a Nevada corporation (the
"Assimilated"), both corporations being sometimes referred to herein as the
"Constituent Corporations."
RECITALS:
A. Survivor is a corporation duly organized and existing under the laws of
the State of Colorado and has an authorized capital of 55,000,000 shares, of
which 50,000,000 shares are designated as common stock, par value $.0001, of
which 1,200,000 shares are outstanding, and of which 5,000,000 shares are
designated as preferred shares, $.0001 par value, none of which have been issued
or are outstanding.
B. Assimilated is a corporation duly organized and existing under the laws
of the State of Nevada and has an authorized capital of 55,000,000 shares, $.001
par value, of which 50,000,000 shares are designated as Common Stock and of
which 5,000,000 shares are designated as Preferred Stock. A total of 682,500
shares of Common Stock are issued and outstanding. No preferred shares have been
issued or are outstanding.
C. The respective Boards of directors of Survivor and Assimilated have
approved this Agreement and have directed that this Agreement be submitted to a
vote of their respective shareholders.
Now, therefore, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, Survivor and
Assimilated hereby agree, subject to the terms and conditions hereinafter set
forth, as follows:
ARTICLE I. MERGER.
1.1 Merger and Name Change. In accordance with the provisions of this
Agreement, the General Corporation Law of Nevada, and the Colorado Business
Corporation Act, Assimilated shall be merged with and into Survivor (the
"Merger"), and the name of the surviving corporation shall be GALLAGHER RESEARCH
AND DEVELOPMENT COMPANY.
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved
by the shareholders of each Constituent Corporation in accordance with the
respective requirements of the General Corporation Law of Nevada and the
Colorado Business Corporation Act.
(b) An executed counterpart of this Agreement shall have been filed
with the Secretary of State of the State of Colorado; and
<PAGE>
(c) Executed Articles of Merger or other documents meeting the
requirements of the General Corporation Law of Nevada shall have been filed with
the Secretary of State of the State of Nevada.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date."
1.3 Certificate of Incorporation. The Articles of Incorporation of Survivor
as in effect immediately prior to the Effective Date shall continue in full
force and effect as the Articles of Incorporation of the Survivor until duly
amended in accordance with the provisions thereof and applicable law.
1.4 Bylaws. The Bylaws of Survivor as in effect immediately prior to the
Effective Date shall continue in full force and effect as the Bylaws of the
Survivor without any change as a result of the Merger.
1.5 Directors and Officers. The directors and officers of Survivor in
office immediately prior to the Effective Date shall continue in office and
shall constitute the directors and officers of Survivor until their respective
successors shall have been elected and duly qualified or until otherwise
provided by law, the Articles of Incorporation of Survivor and the Bylaws of
Survivor.
1.6 Effect of Merger. Upon the Effective Date, the separate existence of
Assimilated shall cease and the Survivor (i) shall continue to possess all of
the assets, rights, powers and property of Survivor as constituted immediately
prior to the Effective Date, shall be subject to all actions previously taken by
the Board of Directors of Assimilated and shall succeed, without other transfer,
to all of the assets, rights, powers and property of Assimilated, (ii) shall
continue to be subject to all of the debts, liabilities and obligations of
Assimilated as constituted immediately prior to the Effective Date and shall
succeed, without other transfer, to all of the debts, liabilities and
obligations of Assimilated in the same manner as if Survivor had itself incurred
them, all as more fully provided under the applicable provisions of the General
Corporation Law of Nevada and the Colorado Business Corporation Act.
ARTICLE II. MANNER OF CONVERSION OF COMMON STOCK.
2.1 Assimilated Common Stock. Upon the Effective Date, each share of common
stock, $.001 par value, of Assimilated issued and outstanding immediately prior
thereto shall, by virtue of the Merger and without any action by any holder of
such shares or any other person, be converted into and exchanged for four tenths
(.4) of a fully paid and nonassessable share of Common Stock, $.0001 par value,
of Survivor (the "Merger Shares"); that is, ten (10) shares of Assimilated
common stock shall be converted into four (4) Merger Shares.
2.2 Outstanding Common Stock of Survivor. Upon the Effective Date, each
share of the 100 shares of Common Stock of Survivor issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by the holder of such shares or any other person, be cancelled and returned to
the status of authorized but unissued shares.
2.3 Exchange of Certificates. On or after the Effective Date of the Merger:
(a) All of the outstanding certificates which prior to that time
represented the outstanding Common Shares of Assimilated shall be deemed for all
purposes to evidence ownership of and to represent the Merger Shares into which
the shares of Assimilated represented by such certificates have been converted
as herein provided. The registered owner on the books and records of Assimilated
or its transfer agent of any such outstanding stock certificate shall, until
such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to Survivor or its transfer agent, have and be entitled
to exercise any voting and other rights with respect to and to receive any
dividend and other distributions upon the Merger Shares evidenced by such
outstanding certificate as above provided.
2
<PAGE>
(b) The Merger shall be consummated and the Merger shares issued in
reliance upon Rule 504 of Regulation D under the Securities Act of 1933, as
amended ("Act"). A Form D will be filed with the Securities and Exchange
Commission as required by law. Accordingly, each certificate representing Merger
Shares issued in the Merger shall not bear any investment or other restrictive
legend.
(c) If any certificate for Merger Shares is to be issued in a name
other than that in which the certificate surrendered in exchange therefor is
registered, it shall be a condition of issuance thereof that the certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay any transfer or other taxes payable by reason of the issuance
of such new certificate in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of Survivor that
such tax has been paid or is not payable.
ARTICLE III. GENERAL MATTERS.
3.1 Covenants of Survivor. Survivor covenants and agrees that it will, on
or before the Effective Date:
(a) Qualify to do business as a foreign corporation in all states
wherein its operations require it to qualify under applicable state laws.
(b) File all documents with the franchise tax authorities of the State
of Nevada necessary to the assumption by Survivor of all of the franchise tax
liabilities of Assimilated.
(c) Take such other actions as may be required by the General
Corporation Law of Nevada or other applicable law.
3.2 Abandonment. At any time before the Effective Date, this Agreement may
be terminated and the Merger abandoned for any reason whatever by the Board of
Directors of Survivor or Assimilated, or both, notwithstanding the approval of
this Agreement and Merger by the shareholders of Assimilated or Survivor or
both.
3.3 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or a
certificate in lieu thereof) with the Secretary of State of the State of Nevada,
provided that an amendment made subsequent to the adoption of this Agreement by
the shareholders of either Constituent Corporation shall not (i) alter or change
the amount or kind of Merger Shares to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation, (ii) alter or change any term of the Certificate of
Incorporation of the Survivor to be effected by the Merger, or (iii) alter or
change any of the terms and conditions of this Agreement if such alteration or
change would adversely affect the holders of any class or series thereof of such
Constituent Corporation.
3
<PAGE>
3.4 Expenses. Survivor shall pay all costs related to the Merger and
necessary filings and actions in connection therewith.
3.5 Mutual Covenants of Constituent Corporations. Survivor and Assimilated
each agree that, between the date hereof and the Effective Date, it will not (i)
enter into any employment contracts, (ii) grant any options, warrants or similar
rights (nor any instrument or security containing such an option, warrant or
similar right) exercisable for, exchangeable for or convertible into its common
shares or other securities, (iii) issue any stock or other securities, including
debt instruments, or (iv) declare or pay any dividends in stock or cash or make
any other distribution on or with respect to its outstanding common stock.
Either party may but need not abandon the Merger if the holders of more than 5%
of the outstanding shares of Assimilated should dissent from the Merger.
3.6 Registered Office. The Registered Office of the Survivor in the State
of Colorado is located at 1576 S. Robb Way, Lakewood, Colorado 80232, and Alton
V. Gallagher is the Resident Agent of the Survivor at such address.
3.7 Further Actions. If at any time Survivor shall consider or be advised
that any further assignment or assurances in law are necessary or desirable to
vest or to perfect or confirm of record in Survivor the title to any property or
rights of Assimilated, or to otherwise carry out the provisions of this
Agreement, then the proper officers and directors of Assimilated as of the
Effective Date shall execute and deliver to Survivor any and all proper deeds,
assignments and assurances in law, and do all things necessary or proper to
vest, perfect or confirm title to such property or rights in Survivor.
3.8 Governing Law. This Agreement shall in all respects be interpreted and
enforced in accordance with and governed by the laws of the State of Colorado.
3.9 Counterparts. In order to facilitate the filing and recording of this
Agreement, it may be executed in any number of counterparts, each of which shall
be deemed to be an original.
3.10 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of Survivor located at 1576 S. Robb Way, Lakewood,
Colorado 80232, and copies thereof will be furnished to any shareholder of any
Constituent Corporation upon request and without cost.
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolution of the Boards of Directors Assimilated and survivor, is hereby
executed on behalf of each of such corporations and attested by their respective
officers thereto duly authorized.
GALLAGHER RESEARCH AND
DEVELOPMENT COMPANY
(A Colorado Corporation)
ATTEST: By /s/ Alton V. Gallagher
------------------------------
Alton V. Gallagher, President
By /s/ Rodney M. Gallagher
-----------------------------------
Rodney M. Gallagher, Secretary
4
<PAGE>
MNS EAGLE EQUITY GROUP V, INC.
(A Nevada Corporation)
ATTEST: By /s/ Stephen M. Siedow
------------------------------
Stephen M. Siedow, President
By /s/ John D. Brasher Jr.
------------------------------
John D. Brasher Jr., Secretary
5
Exhibit 3.1
CERTIFICATE OF INCORPORATION
of
GALLAGHER RESEARCH CORPORATION
(A Nevada Corporation)
FIRST. The name of this corporation is GALLAGHER RESEARCH CORPORATION.
SECOND. The Corporation's Registered Office in the State of Nevada is
located at 2533 N. Carson Street, Carson City, Nevada 89706. The Corporation's
Resident Agent at this address is Laughlin Associates, Inc.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Nevada. The Corporation may conduct all or any part of its business, and
may hold, purchase, mortgage, lease and convey real and personal property,
anywhere in the world. The Corporation shall have perpetual duration.
FOURTH. The name and mailing address of the Incorporator is:
Name Mailing Address
---- ---------------
John D. Brasher Jr. 90 Madison Street, Suite 707
Denver, Colorado 80206
Upon the filing of this Certificate of Incorporation the powers of the
Incorporator shall terminate. The name and address of the person who is to serve
as the one director until the first annual meeting of shareholders or until his
successor is duly elected and has qualified is:
Name Mailing Address
---- ---------------
Stephen M. Siedow 12373 E. Cornell Avenue
Aurora, Colorado 80014
{CAPITAL STOCK}
FIFTH. The aggregate number of shares of capital stock of all classes which
the Corporation shall have authority to issue is FIFTY FIVE MILLION
(55,000,000), of which FIFTY MILLION (50,000,000) shares having a par value of
$.001 per share shall be of a class designated "Common Stock" (or "Common
Shares") and FIVE MILLION (5,000,000) shares having a par value of $.001 per
share shall be of a class designated "Preferred Stock" (or "Preferred Shares").
All shares of the Corporation shall be issued for such consideration or
considerations as the Board of Directors may from time to time determine. The
designations, voting powers, preferences, optional or other special rights and
qualifications, limitations, or restrictions of the above classes of stock shall
be as follows:
I. PREFERRED STOCK
(a) Issuance in Class and Series. Shares of Preferred Stock may be issued
in one or more classes or series at such time or times as the Board of Directors
may determine. All shares of any one series shall be of equal rank and identical
in all respects.
1
<PAGE>
(b) Authority of Board for Issuance. Authority is hereby expressly granted
to the Board of Directors to fix from time to time, by resolution or resolutions
providing for the issuance of any class or series of Preferred Stock, the
designation of such classes and series and the powers, preferences and rights of
the shares of such classes and series, and the qualifications, limitations or
restrictions thereof, including the following:
1. The distinctive designation and number of shares comprising such
class or series, which number may (except where otherwise provided by the
Board of Directors in creating such class or series) be increased or
decreased (but not below the number of shares then outstanding) from time
to time by action of the Board of Directors;
2. The rate of dividend, if any, on the shares of that class or
series, whether dividends shall be cumulative and, if so, from which date
or dates, the relative rights of priority, if any, of payment of dividends
on shares of that class or series over shares of any other class or series;
3. Whether the shares of that class or series shall be redeemable at
the option of the Corporation or of the holder of the shares or of another
person or upon the occurrence of a designated event and, if so, the terms
and conditions of such redemption, including the date or dates upon or
after which they shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different conditions and
different redemption dates;
4. Whether that class or series shall have a sinking fund for the
redemption or purchase of shares of that class or series and, if so, the
terms and amounts payable into such sinking fund;
5. The rights to which the holders of the shares of that series shall
be entitled in the event of voluntary or involuntary liquidation,
dissolution, distribution of assets or winding-up of the Corporation,
relative rights of priority; if any, of payment of shares of that class or
series;
6. Whether the shares of that class or series shall be convertible
into or exchangeable for shares of stock of any class or any other series
of Preferred Stock and, if so, the terms and conditions of such conversion
or exchange, including the method of adjusting the rates of conversion or
exchange in the event of a stock split, stock dividend, combination of
shares or similar event;
7. Whether the issuance of any additional shares of such class or
series, or of any shares of any other class or series, shall be subject to
restrictions as to issuance, or as to the powers, preferences or rights of
any such other class or series;
8. Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such class or series, as the Board of
Directors may deem advisable and as shall not be inconsistent with the
provisions of the Corporation's Charter, as from time to time amended, and
to the full extent now or hereinafter permitted by the laws of Nevada.
(c) Dividends. Payment of dividends shall be as follows:
1. The holders of Preferred Stock of each class or series, in
preference to the holders of Common Stock, shall be entitled to receive, as
and when declared by the Board of Directors out of funds legally available
2
<PAGE>
therefor, all dividends, at the rate for such class or series fixed in
accordance with the provisions of this Article FIFTH and no more;
2. Dividends may be paid upon, or declared or set aside for, any class
or series of Preferred Stock in preference to the holders of any other
class or series of Preferred Stock in the manner determined by the
resolutions of the Board of Directors authorizing and creating such class
or series;
3. So long as any shares of Preferred Stock shall be outstanding, in
no event shall any dividend, whether in cash or in property, be paid or
declared nor shall any distribution be made, on the Common Stock, nor shall
any shares of Common Stock be purchased, redeemed or otherwise acquired for
value by the Corporation, unless all dividends on all cumulative classes
and series Preferred Stock with respect to all past dividend periods, and
unless all dividends on all classes and series of Preferred Stock for the
then current dividend period shall have been paid or declared, and provided
for, and unless the Corporation shall not be in default with respect to any
of its obligations with respect to any sinking fund for any class or series
of Preferred Stock. The foregoing provisions of this subparagraph (3) shall
not, however, apply to any dividend payable in Common Stock;
4. No dividend shall be deemed to have accrued on any share of
Preferred Stock of any class or series with respect to any period prior to
the date of the original issue of such share or the dividend payment date
immediately preceding or following such date of original issue, as may be
provided in the resolutions of the Board of Directors creating such class
or series. Preferred Stock shall not be entitled to participate in any
dividends declared and paid on Common Stock, whether payable in cash, stock
or otherwise. Accruals of dividends shall not pay interest.
(d) Dissolution or Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution of assets or winding-up of the Corporation,
the holders of the shares of each class or series of Preferred Stock then
outstanding shall be entitled to receive out of the net assets of the
Corporation, but only in accordance with the preferences, if any, provided for
such series, before any distribution or payment shall be made to the holders of
Common Stock, the amount per share fixed by the resolution or resolutions of the
Board of Directors to be received by the holder of each such share on such
voluntary or involuntary liquidation, dissolution, distribution of assets or
winding-up, as the case may be. If such payment shall have been made in full to
the holders of all outstanding Preferred Stock of all classes and series, or
duly provided for, the remaining assets of the Corporation shall be available
for distribution among the holders of Common Stock as provided in this Article
FIFTH. If upon any such liquidation, dissolution, distribution of assets or
winding-up, the net assets of the Corporation available for distribution among
the holders of any one or more classes or series of Preferred Stock which (i)
are entitled to a preference over the holders of Common Stock upon such
liquidation, dissolution, distribution of assets or winding-up, and (ii) rank
equally in connection therewith, shall be insufficient to make payment for the
preferential amount to which the holders of such shares shall be entitled, then
such assets shall be distributed among the holders of each such series of
Preferred Stock ratably according to the respective amounts to which they would
be entitled in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full. Neither the
consolidation nor merger of the Corporation, nor the exchange, sale, lease or
conveyance (whether for cash, securities or other property) of all,
substantially all or any part of its assets, shall be deemed a liquidation,
dissolution, distribution of assets or winding-up of the Corporation within the
meaning of this provision.
3
<PAGE>
(e) Voting Rights. Except to the extent otherwise required by law or
provided in the resolution of the Board of Directors adopted pursuant to
authority granted in this Article FIFTH, the shares of Preferred Stock shall
have no voting power with respect to any matter whatsoever. The Board of
Directors may determine whether the shares of any class or series shall have
limited, contingent, full or no voting rights, in addition to the voting rights
provided by law and, if so, the terms of such voting rights. Whenever holders of
Preferred Stock are entitled to vote on a matter, each holder of record of
Preferred Stock shall be entitled to one vote for each share standing in his
name on the books of the Corporation and entitled to vote.
II. COMMON STOCK
(a) Issuance. The Common Stock may be issued from time to time in one or
more classes or series in any manner permitted by law, as determined by the
Board of Directors and stated in the resolution or resolutions providing for
issuance thereof. Each class or series shall be appropriately designated, prior
to issuance of any shares thereof, by some distinguishing letter, number or
title. All shares of each class or series of Common Stock shall be alike in
every particular and shall be of equal rank and have the same power, preferences
and rights, and shall be subject to the same qualifications, limitations and
restrictions, if any.
(b) Voting Powers. The Common Stock may have such voting powers (full,
limited, contingent or no voting powers), such designations, preferences and
relative, participating, optional or other special rights, and be subject to
such qualifications, limitations and restrictions, as the Board of Directors
shall determine by resolution or resolutions. Unless otherwise resolved by the
Board of Directors at the time of issuing Common Shares, (i) each Common Share
shall be of the same class, without any designation, preference or relative,
participating, optional or other special rights, and subject to no
qualification, limitation or restriction, and (ii) Common Shares shall have
unlimited voting rights, including but not limited to the right to vote in
elections for directors, and each holder of record of Common Shares entitled to
vote shall have one vote for each share of stock standing in his name on the
books of the Corporation and entitled to vote.
(c) Dividends. After the requirements with respect to preferential
dividends, if any, on Preferred Stock, and after the Corporation shall have
complied with all requirements, if any, with respect to the setting aside of
sums in a sinking fund for the purchase or redemption of shares of any class or
series of Preferred Stock, then and not otherwise, the holders of Common Stock
shall receive, to the extent permitted by law, such dividends as may be declared
from time to time by the Board of Directors.
(d) Dissolution or Liquidation. After distribution in full of the
preferential amount, if any, to be distributed to the holders of Preferred
Stock, in the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding-up of the Corporation, the holders of Common
Stock shall be entitled to receive all the remaining assets of the Corporation
of whatever kind available for distribution to shareholders ratably in
proportion to the number of shares of Common Stock respectively held by them.
III. GENERAL MATTERS
(a) Capital. The portion of the consideration received by the Corporation
upon issuance of any of its shares that shall constitute "capital" within the
meaning of the General Corporation Law of Nevada shall be (1) in the case of
par-value shares, the par value thereof, and (2) in the case of shares without
par value, the stated value of such shares as determined by the Board of
Directors at the time of issuance; provided, that if no stated value is
determined at the time that shares without par value are issued, the entire
consideration to be received for the shares shall constitute capital.
4
<PAGE>
(b) Fully Paid and Nonassessable. Any and all shares of Common or Preferred
Stock issued by the Corporation for which not less than the portion of the
consideration to be received determined to be "capital" has been paid to the
Corporation, provided the Corporation has received a promissory note or other
binding legal obligation of the purchaser to pay the balance thereof, shall be
deemed fully paid and nonassessable shares.
(c) Amendment of Shareholder Rights. So long as no shares of any class or
series established by resolution of the Board of Directors have been issued, the
voting rights, designations, preferences and relative, optional, participating
or other rights of these shares may be amended by resolution of the Board of
Directors.
(d) Status of Certain Shares. Shares of Preferred or Common Stock which
have redeemed, converted, exchanged, purchased, retired or surrendered to the
Corporation, or which have been reacquired in any other manner, shall have the
status of authorized and unissued shares and may be reissued by the Board of
Directors as shares of the same or any other series, unless otherwise provided
herein or in the resolution authorizing and establishing the shares.
(e) Denial of Preemptive Rights. No holder of any shares of the Corporation
shall be entitled as a matter of right to subscribe for or purchase any part of
any new or additional issue of stock of any class or of securities convertible
into or exchangeable for stock of any class, whether now or hereafter authorized
or whether issued for money, for a consideration other than money, or by way of
dividend.
(f) Convertibility. Common Shares or other shares of any class or series,
and notes, debentures, bonds and other debt instruments issued by the
Corporation or any affiliated company, may be made convertible into or
exchangeable for, at the option of the Corporation or the holder or upon the
occurrence of a specified event, shares of any other class or classes or any
other series of the same or any other class or classes of shares of the
Corporation, at such price or prices or at such rate or rates of exchange and
with such adjustments as shall be set forth in the resolution or resolutions
providing for the issuance of such convertible or exchangeable shares adopted by
the Board of Directors.
(g) Redeemability. Common Shares may be made redeemable at the option of
the Corporation or upon the occurrence of a designated event, if and to the
extent now or subsequently allowed by the General Corporation Law of Nevada, as
such law may subsequently be amended, and the terms and conditions of
redemption, including the date or dates upon or after which they shall be
redeemable, the amount per share payable in case of redemption and any variance
in the amount or amounts payable, among other terms, conditions and limitations
which may be imposed, may be fixed and established by the Board of Directors in
the resolution or resolutions authorizing the issuance of redeemable Common
Shares.
{VOTING OF SHAREHOLDERS}
SIXTH. The following provisions are hereby adopted for the purpose of
regulating certain matters relating to the voting of shareholders of the
Corporation:
(a) Definitions. Whenever the term "total voting power" appears in this
Charter, it shall mean all shares of the Corporation entitled to vote at a
meeting or on a question presented for shareholder approval, and of every class
or series of shares entitled to vote by class or series. Whenever the term
"votes cast" appears in this Charter, it shall mean the total number of voting
shares out of the total voting power which were unequivocally voted in favor of
or against a director standing for election or a matter presented for
shareholder approval at a legal meeting which commenced with a quorum.
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(b) Quorum. A majority of the total voting power, or where a separate vote
by class or series is required, a majority of the voting shares of each such
class or series, represented in person or by proxy, shall constitute a quorum at
any meeting of the Corporation's shareholders.
(c) Vote Required. Any action to be taken by the Corporation's shareholders
at any valid meeting which commenced with a quorum shall require the affirmative
vote only of a majority of the votes cast, except where this Charter or the
Corporation's Bylaws then in effect requires the affirmative vote of a higher
proportion of the votes cast or requires the affirmative vote of a proportion of
the total voting power, and except where the Nevada General Corporation Law
specifically requires the affirmative vote of a majority of all the votes
entitled to be cast. Directors shall be elected by plurality vote. Abstentions
from voting shall not be considered in the tallying of votes. Nothing contained
in this Article SIXTH shall affect the voting rights of holders of any class or
series of shares entitled to vote as a class or by series. The Bylaws may
provide for the vote necessary at any adjournment of a duly called meeting for
which a quorum was not obtained.
(d) Manner of Voting; Etc. The vote of shareholders may be taken at a
meeting by a show of hands or other method authorized by the Board of Directors.
Written ballots shall be used only upon authorization of the Board of Directors
or as provided in the Corporation's Bylaws. Cumulative voting shall not be
allowed in the election of directors.
(e) Action Without Meeting. Any action required or permitted to be taken at
a meeting of the shareholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by shareholders holding at least a majority of the voting
power, except that if a different proportion of voting power is required for
such an action at a meeting, then that proportion of written consents is
required.
(f) Shareholder Ratification. Any contract, transaction, or act of the
Corporation or of the directors which shall be ratified by vote of the
shareholders at any annual meeting, or at any special meeting called for such
purpose, or by means of a written consent of shareholders in lieu of a meeting,
shall so far as permitted by law be as valid and as binding as though ratified
by every shareholder of the Corporation.
{CONCERNING SHAREHOLDERS, DIRECTORS AND OFFICERS}
SEVENTH. The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
directors, officers and shareholders:
(a) Number of Directors. The number of Directors shall be as fixed in the
Bylaws. In the absence of such provision in the Bylaws, the Corporation shall
have ONE (1) Director. Directors shall be elected by plurality vote and need not
be elected by written ballot, except as provided in the Bylaws.
(b) Removal of Directors. A director of the Corporation, or the entire
Board of Directors of the Corporation, may be removed by the shareholders, with
or without cause, only upon the affirmative vote of the holders of not less than
two-thirds (2/3) of the total voting power, without considering the vote of the
director or directors sought to be removed.
(c) Removal of Officers and Employees. Unless the Bylaws otherwise provide,
any officer or employee of the Corporation may be removed at any time with or
without cause by the Board of Directors or by any committee or superior officer
upon whom such power of removal may be conferred by the Bylaws or by authority
of the Board of Directors, without prejudice, however, to existing contractual
rights.
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(d) Corporate Opportunities. The officers, directors and other members of
management of the Corporation shall be subject to the doctrine of "corporate
opportunities" only insofar as it applies to any business opportunity (i) of a
type falling within the regular business or operations of the Corporation, or
(ii) in which the 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. All such business opportunities which
come to the attention of the officers, directors, and other members of
management of the Corporation shall be disclosed promptly to the Corporation and
made available to it. The Board of Directors may reject any business opportunity
presented to it, and only thereafter may any officer, director or other member
of management avail himself of such opportunity. The provisions of this
paragraph shall not be construed to release any employee of the Corporation from
any fiduciary duties which he may have to the Corporation.
{BYLAWS}
EIGHTH. The initial Bylaws of the Corporation shall be adopted by its Board
of Directors. The power to alter, amend or repeal the Bylaws or adopt new Bylaws
shall be vested in the Board of Directors, subject to the right of the
shareholders to alter, amend or repeal such Bylaws or adopt new Bylaws. The
Bylaws may contain any provisions for the regulation and management of the
affairs of the Corporation not inconsistent with law or this Charter.
{INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS}
NINTH. The following provisions are hereby adopted for the purpose of
defining and regulating certain rights of directors, officers and others in
respect of indemnification and related matters.
(a) Actions, Suits or Proceedings Other than by or in the Right of the
Corporation. The Corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
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 or has agreed to become a director, officer, employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges, expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, 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, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation or that, with respect to
any criminal proceeding, he had reasonable cause to believe that his conduct was
unlawful.
(b) Actions or Suits by or in the Right of the Corporation. The Corporation
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by or
in the right of the Corporation to procure a judgment in its favor by reason of
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the fact that he is or was or has agreed to become a director, officer, employee
or agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges and expenses (including amounts paid in settlement and attorney's
fees) actually and reasonably incurred by him or on his behalf in connection
with the defense or settlement of such action or suit and any appeal therefrom,
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. No indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged by a court of competent jurisdiction after exhaustion of all
appeals therefrom to be liable to the Corporation or for amounts paid in
settlement to the Corporation unless and only to the extent that the court in
which such action or suit was brought or other court of competent jurisdiction
shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such costs, charges and expenses
which the court shall deem proper.
(c) Indemnification for Costs, Charges and Expenses of Successful Party.
Notwithstanding the other provisions of this Article NINTH, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit or proceeding referred
to in Sections (a) and (b) of this Article NINTH, or in defense of any claim,
issue or matter therein, he shall be indemnified against all costs, charges and
expenses (including attorney's fees) actually and reasonably incurred by him or
on his behalf in connection therewith.
(d) Determination of Right to Indemnification. Any indemnification under
Sections (a) and (b) of this Article NINTH (unless ordered by a court) shall be
paid by the Corporation unless a determination is made (i) by a disinterested
majority of the Board of Directors who were not parties to such action, suit or
proceeding, or (ii) if such disinterested majority of the Board of Directors so
directs or cannot be obtained, by independent legal counsel in a written
opinion, or (iii) by the shareholders, that indemnification of the director or
officer is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Sections (a) and (b) of this Article NINTH.
(e) Advances of Costs, Charges and Expenses. Costs, charges and expenses
(including attorney's fees) incurred by a person referred to in Sections (a) or
(b) of this Article NINTH 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; provided, however, that the payment of such
costs, charges and expenses incurred by a director or officer in his capacity as
a director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer) in advance of the final
disposition of such action, suit or proceeding shall be made only upon receipt
of an undertaking by or on behalf of the director or officer to repay all
amounts so advanced in the event that it shall ultimately be determined that
such director or officer is not entitled to be indemnified by the Corporation as
authorized in this Article, accompanied by evidence satisfactory to the Board of
Directors of ability to make such repayment. Such costs, charges and expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the majority of the Directors deems appropriate. The
majority of the Directors may, in the manner set forth above, and upon approval
of such director, officer, employee or agent of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
(f) Procedure for Indemnification. Any indemnification under Sections (a),
(b) and (c), or advance of costs, charges and expenses under Section (e) of this
Article NINTH, shall be made promptly, and in any event within 60 days, upon the
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written request of the director or officer. The right to indemnification or
advances as granted by this Article shall be enforceable by the director or
officer in any court of competent jurisdiction if the Corporation denies such
request, in whole or in part, or if no disposition thereof is made within 60
days. Such person's costs and expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Corporation. It shall be a defense to
any such action (other than an action brought to enforce a claim for the advance
of costs, charges and expenses under Section (e) of this Article NINTH where the
required undertaking, if any, has been received by the Corporation) that the
claimant has not met the standard of conduct set forth in Sections (a) or (b) of
this Article NINTH, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections (a) or (b) of this Article NINTH, nor
the fact that there has been an actual determination by the Corporation
(including its Board of Directors, its independent legal counsel and its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(g) Settlement. If in any action, suit or proceeding, including any appeal,
within the scope of Sections (a) or (b) of this Article NINTH, the person to be
indemnified shall have unreasonably failed to enter into a settlement thereof,
then, notwithstanding any other provision hereof, the indemnification obligation
of the Corporation to such person in connection with such action, suit or
proceeding shall not exceed the total of the amount at which settlement could
have been made and the expenses by such person prior to the time such settlement
could reasonably have been effected.
(h) Other Rights; Continuation of Right to Indemnification. The
indemnification provided by this Article shall not be deemed exclusive of any
other rights to which any director, officer, employee or agent seeking
indemnification may be entitled under any law (common or statutory), agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
office or while employed by or acting as agent for the Corporation, 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 estate, heirs, executors and
administrators of such person. All rights to indemnification under this Article
shall be deemed to be a contract between the Corporation and each director or
officer of the Corporation who serves or served in such capacity at any time
while this Article NINTH is in effect. Any repeal or modification of this
Article NINTH or any repeal or modification of relevant provisions of the
General Corporation Law of Nevada or any other applicable laws shall not in any
way diminish any rights to indemnification of such director, officer, employee
or agent or the obligations of the Corporation arising hereunder. This Article
NINTH shall be binding upon any successor corporation to this Corporation,
whether by way of acquisition, merger, consolidation or otherwise.
(i) Exceptions to Indemnification Right. Notwithstanding any other language
in this Charter, the Corporation shall not be obligated pursuant to the terms of
this Charter:
(1) Claims Initiated by Indemnitee. To indemnify or advance expenses
to any person with respect to proceedings or claims initiated or brought
voluntarily by him or her and not by way of defense, expect with respect to
proceedings brought to establish or enforce a right to indemnification
under this Charter or any other statue or law or otherwise as required
under the General Corporation Law of Nevada, but such indemnification or
advancement of expenses may be provided by the Corporation in specific
cases if the Board of Directors finds it to be appropriate; or
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(2) Lack of Good Faith. To indemnify any person for any expenses
incurred by him or her with respect to any proceeding instituted by him or
her to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by him or
her in such proceeding was not made in good faith or was frivolous;
(3) Insured Claims. To indemnify any person for expenses or
liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid directly to him or her by an insurance
carrier under a policy of officers' and directors' liability insurance
maintained by the Corporation.
(4) Claims Under Section 16(b). To indemnify any person for expenses
or the payment of profits arising from the purchase and sale by him or her
of securities in violation of Section 16(b) of the Securities Exchange Act
of 1934, as amended, or any similar or successor statute.
(j) Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was or has agreed to become 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 or on his behalf in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article NINTH; provided, however, that such insurance is available on acceptable
terms, which determination shall be made by a vote of a majority of the
Directors.
(k) Savings Clause. If this Article NINTH or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation (i) shall nevertheless indemnify each director and officer of the
Corporation and (ii) may nevertheless indemnify each employee and agent of the
Corporation, as to any cost, charge and expense (including attorney's fees),
judgment, fine and amount paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
an action by or in the right of the Corporation, to the full extent permitted by
any applicable portion of this Article NINTH that shall not have been
invalidated and to the full extent permitted by applicable law.
(l) Amendment. No amendment, termination or repeal of this Article NINTH
shall affect or impair in any way the rights of any director or officer of the
Corporation to indemnification under the provisions hereof with respect to any
action, suit or proceeding arising out of, or relating to, any actions,
transactions or facts occurring prior to the final adoption of such amendment,
termination or appeal.
(m) Subsequent Legislation. If the General Corporation Law of Nevada is
amended after adoption of this Charter to further expand the indemnification
permitted to directors, officers, employees or agents of the Corporation, then
the Corporation shall indemnify such persons to the fullest extent permitted by
the General Corporation Law of Nevada, as so amended.
(n) Restriction. Notwithstanding any other provision hereof whatsoever, no
person shall be indemnified under this Article NINTH who is adjudged liable for
(i) a breach of duty to the Corporation or its shareholders that resulted in
personal enrichment to which he was not legally entitled, (ii) intentional fraud
or dishonesty or illegal conduct, or (iii) for any other cause prohibited by
applicable state or federal law, unless a court determines otherwise.
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{EXCLUSION OF DIRECTOR LIABILITY}
TENTH. As authorized by Section 78.037(1) of the General Corporation Law of
Nevada, no director or officer of the Corporation shall be personally liable to
the Corporation or any shareholder thereof for monetary damages for breach of
his fiduciary duty as a director or officer, except for liability for (a) any
acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law, or (b) any payment of dividends in violation of Section 78.300
of the General Corporation Law of Nevada, as it now exists or may hereafter be
amended. This Article TENTH shall apply to a person who has ceased to be a
director or officer of the Corporation with respect to any breach of fiduciary
duty which occurred when such person was serving as a director or officer. This
Article TENTH shall not be construed to limit or modify in any way any
director's or officer's right to indemnification or other right whatsoever under
this Charter, the Corporation's Bylaws or the General Corporation Law of Nevada.
If the General Corporation Law of Nevada hereafter is amended to authorize
the further elimination or limitation of the liability of directors or officers
generally, then the liability of the Corporation's directors and officers, in
addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the General Corporation Law of Nevada
as so amended. Any repeal or modification of this Article TENTH by the
shareholders shall be prospective only and shall not adversely affect any
limitation on the personal liability of any director or officer existing at the
time of such repeal or modification.
{AMENDMENT}
ELEVENTH. The Corporation reserves the right to amend, restate or repeal
any provision contained in this Charter, in the manner now or hereafter
prescribed by statute, and all rights conferred on shareholders are granted
subject to this reservation.
{INAPPLICABILITY OF CONTROL SHARE ACQUISITION STATUTE}
TWELFTH. The Corporation expressly elects not to be governed by Sections
78.378 through 78.3793 of the General Corporation Law of Nevada (concerning
acquisitions of controlling interest in corporations), as it now exists or may
hereafter be amended, or any successor statute. The affirmative vote of at least
a majority of the total voting power shall be required to amend, repeal or adopt
any provision inconsistent with this Article TWELFTH.
IN WITNESS WHEREOF, the undersigned, being the Incorporator named above,
for the purpose of forming a corporation pursuant to the General Corporation Law
of Nevada, does hereby make and file this Certificate of Incorporation for
GALLAGHER RESEARCH CORPORATION.
DATED: March 31, 1999
INCORPORATOR:
X /s/ John D. Brasher Jr.
------------------------------
John D. Brasher Jr.
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ACKNOWLEDGMENT
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above jurisdiction, personally came and appeared JOHN
D. BRASHER JR., the Incorporator named in the foregoing Certificate of
Incorporation, who after being duly sworn declared that he executed the
foregoing Certificate of Incorporation as his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and seal on March 31, 1999.
X /s/ Jennifer S. Myers
----------------------- My Commission Expires:
NOTARY PUBLIC October 22, 2001
(SEAL)
12
Exhibit 3.2
BYLAWS
of
GALLAGHER RESEARCH CORPORATION
(A Nevada Corporation)
ARTICLE I
General
1.01 Applicability. These Bylaws provide rules for conducting the business
of this corporation (the "Company"). Every shareholder and person who
subsequently becomes a shareholder, the Board of Directors, Committees and
Officers of the Company shall comply with these Bylaws, as amended from time to
time. All bylaws and resolutions heretofore adopted by the Board of Directors
are hereby repealed, to the extent in conflict with the provisions of these
Bylaws.
1.02 Offices. The principal office of the Company shall be selected by the
Board of Directors from time to time and may be within or without the State of
Nevada. The Company may have such other offices, within or without the State of
Nevada, as the Board of Directors may, from time to time, determine. The
registered office of the Company required by the General Corporation Law of
Nevada to be maintained in Nevada may be, but need not be, identical with the
principal office if in Nevada, and the address of the registered office may be
changed from time to time by the Board of Directors.
1.03 Definition of Terms. Terms defined in the Company's Certificate of
Incorporation, as amended and restated from time to time (the "Charter"), shall
have the same meanings when used in these Bylaws.
ARTICLE II
Stock Certificates
2.01 Stock Certificates. The shares of the Company's capital stock shall be
represented by consecutively numbered certificates signed by the President or a
Vice President and the Secretary or Assistant Secretary of the Company, and
sealed with the seal of the Company, or a facsimile thereof. If certificates are
signed by a transfer agent and registrar other than the Company or an employee
thereof, the signatures of the officers of the Company may be facsimile. In case
any officer who has signed (by real or facsimile signature) a certificate shall
have ceased to hold such office before the certificate is issued, it may be
issued by the Company with the same effect as if he continued to hold such
office on the date of issue. Each certificate representing shares shall state
upon the face thereof: (i) that the Company is organized under the laws of the
State of Nevada; (ii) the name of the person to whom issued; (iii) the number,
class and series (if any) of shares which such certificate represents; and (iv)
the par value, if any, of the shares represented by such certificate, or a
statement that the shares have no par value.
If any class or series of shares is subject to special powers,
designations, preferences or relative, participating or other special rights,
then such (together with all qualifications, limitations or restrictions of such
preferences or rights) shall be set forth in full or summarized on the
certificate representing such class or series. Moreover, each certificate shall
state that the Company will furnish, without charge, to the registered holder of
the shares represented by such certificate who so requests a statement setting
forth such information in full.
Each certificate also shall set forth restrictions upon transfer, if any,
or a reference thereto, as shall be adopted by the Board of Directors or by the
shareholders, or as may be contained in this Article II. Any shares issued
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without registration under the Securities Act of 1933, as amended ("Act"), shall
bear a legend restricting transfer unless such shares are registered under such
act or an exemption from registration is available for a proposed transfer.
2.02 Consideration for Shares. Shares of the Company shall be issued, and
treasury shares may be disposed of, for such consideration or considerations as
shall be fixed from time to time by the Board of Directors. No shares shall be
issued for less than the par value thereof. The consideration for the issuance
of shares may be paid, in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
Company, or as permitted in the Charter.
2.03 Lost Certificates. The Board of Directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Company alleged to have been lost or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, and the Board of Directors when authorizing such issue of a
new certificate or certificates may in its discretion, and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates or his legal representative to advertise the same in
such manner as it shall require, and/or furnish to the Company a bond in such
sum as it may direct, as indemnity against any claim that may be made against
the Company. Except as hereinabove in this section provided, no new certificate
or certificates evidencing shares of stock shall be issued unless and until the
old certificate or certificates, in lieu of which the new certificate or
certificates are issued, shall be surrendered for cancellation.
2.04 Registered Holder as Owner. The Company shall be entitled to treat the
registered holder of any shares of the Company as the owner of such shares, and
shall not be bound to recognize any equitable or other claim to, or interest in,
such shares or rights deriving from such shares, unless and until such
purchaser, assignee, transferee or other person becomes the registered holder of
such shares, whether or not the Company shall have either actual or constructive
notice of the interests of such purchaser, assignee, or transferee or other
person. The purchaser, assignee, or transferee of any of the shares of the
Company shall not be entitled: to receive notice of the meetings of the
shareholders; to vote at such meetings; to examine a list of the shareholders;
to be paid dividends or other sums payable to shareholders; or to own, enjoy and
exercise any other property or rights deriving from such shares against the
Company, until such purchaser, assignee, or transferee has become the registered
holder of such shares.
2.05 Reversions. Cash, property or share dividends, shares issuable to
shareholders in connection with a reclassification of stock, and the redemption
price of redeemed shares, which are not claimed by the shareholders entitled
thereto within TWO years after the dividend or redemption price became payable
or the shares became issuable, despite reasonable efforts by the Company to pay
the dividend or redemption price or deliver the certificate(s) for the shares to
such shareholders within such time shall, at the expiration of such time, revert
in full ownership to the Company, and the Company's obligation to pay any such
dividend or redemption price or issue such shares, as the case may be, shall
thereupon cease; provided, that the Board of Directors may at any time and for
any reason satisfactory to it, but need not, authorize (i) payment of the amount
of cash or property dividend or (ii) issuance of any shares, ownership of which
has reverted to the Company pursuant to this Section of Article II, to the
person or entity who or which would be entitled thereto had such reversion not
occurred.
2.06 Returned Certificates. All certificates for shares changed or returned
to the Company for transfer shall be marked by the Secretary "CANCELLED," with
the date of cancellation, and the transaction shall be immediately recorded in
the certificate book opposite the memorandum of their issue. The returned
certificate may be inserted in the certificate book.
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2.07 Transfer of Shares. Upon surrender to the Company or to a transfer
agent of the Company of a certificate of stock endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, and such
documentary stamps as may be required by law, it shall be the duty of the
Company to issue a new certificate, upon payment by the transferee of such
nominal charge therefor as the Company or its transfer agent may impose. Each
such transfer of stock shall be entered on the stock book of the Company.
Respecting any securities issued in reliance upon Rule 903 of Regulation S under
the Act at any time when the Company is not a "reporting issuer" as defined in
Rule 902 of Regulation S, no transfer of such securities shall be registered
unless made in accordance with the provisions of Regulation S.
2.08 Transfer Agent. The Board of Directors shall have power to appoint one
or more transfer agents and registrars for the transfer and registration of
certificates of stock of any class, and may require that stock certificates
shall be countersigned and registered by one or more of such transfer agents and
registrars. Any powers or duties with respect to the transfer and registration
of certificates may be delegated to the transfer agent and registrar.
ARTICLE III
Meetings of the Shareholders
3.01 Annual Meeting. The annual meeting of the shareholders shall be held
between the 90th and 180th day after the tax year end, at such date and time and
at such place, within or without the State of Nevada, as is designated from time
to time by the Board of Directors and stated in the notice of the meeting. At
each annual meeting the shareholders shall elect a Board of Directors in
accordance with the Charter and shall transact such other business as may
properly be brought before the meeting.
3.02 Special Meetings. Unless otherwise proscribed by law, the Charter or
these Bylaws, special meetings of the shareholders may be called by the Chairman
of the Board, the President, or a majority of the Board of Directors, or by
persons who as of the date of calling the meeting are the holders of not less
than ten percent (10%) of the total voting power. Requests for special meetings
shall state the purpose or purposes of the proposed meeting.
3.03 Notice of Meetings. Except as otherwise provided by law, the Charter
or these Bylaws, written notice of any annual or special meeting of the
shareholders shall state the place, date, and time thereof and, in the case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be given to each shareholder of record entitled to vote at such meeting not
fewer than 10 nor more than 60 days prior to the meeting by any means permitted
in Article IX hereof. No business other than that specified in the notice of a
special meeting shall be transacted at any such special meeting.
3.04 Record Date. In order that the Company may determine shareholders of
record who are entitled (i) to notice of or to vote at any shareholders meeting
or adjournment thereof, (ii) to express written consent to corporate action in
lieu of a meeting, (iii) to receive payment of any dividend or other
distribution, or (iv) to allotment of any rights or to exercise any rights in
respect of any change, conversion or exchange of stock, or in order that the
Company may make a determination of shareholders of record for any other lawful
purpose, the Board of Directors may fix in advance a date as the record date for
any such determination. Such date shall not be more than 60 days, and in case of
a meeting of shareholders, not less than 10 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken,
and in no event may the record date precede the date upon which the Directors
adopt a resolution fixing the record date.
If no record date is fixed for the determination of shareholders entitled
to notice of or to vote at a meeting of shareholders, or shareholders entitled
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to receive payment of a dividend, the date on which notice of the meeting is
given (as defined in Article IX hereof) or the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of the shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section such determination shall apply to any
adjournment thereof, unless the Board of Directors fixes a new record date for
the adjournment.
3.05 Voting List. At least 10 days but nor more than 60 days before any
meeting of shareholders, the officer or transfer agent in charge of the
Company's stock transfer books shall prepare a complete alphabetical list of the
shareholders entitled to vote at such meeting, which list shows the address of
each shareholder and the number of shares registered in his or her name. The
list so prepared shall be maintained at the corporate offices of the Company and
shall be open to inspection by any shareholder, for any purpose germane to the
meeting, at any time during usual business hours during a period of no fewer
than 10 days prior to the meeting. The list shall also be produced and kept open
at any shareholders meeting and, except as otherwise provided by law, may be
inspected by any shareholder or proxy of a shareholder who is present in person
at the meeting. The original stock transfer books shall be prima facie evidence
as to who are the shareholders entitled to examine the list of shareholders and
to vote at any meeting of shareholders.
3.06 Quorum; Adjournments. (a) The holders of a majority of the total
voting power at any shareholders meeting present in person or by proxy shall be
necessary to and shall constitute a quorum for the transaction of business at
all shareholders meetings, except as otherwise provided by law or by the
Articles.
(b) If a quorum is not present in person or by proxy at any shareholders
meeting, a majority of the voting shares present or represented shall have the
power to adjourn the meeting from time to time to the same or another place
within 30 days thereof and no further notice of such adjourned meeting need be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
(c) Even if a quorum is present in person or by proxy at any shareholders
meeting, a majority of the voting shares present or represented shall have the
power to adjourn the meeting from time to time, for good cause, without notice
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, until a new date which is not more
than 30 days after the date of the original meeting.
(d) Any business which might have been transacted at a shareholders meeting
as originally called may be transacted at any meeting held after adjournment as
provided in this Section 3.06 at which reconvened meeting a quorum is present in
person or by proxy. Anything in paragraph (b) of this Section to the contrary
notwithstanding, if an adjournment is for more than 30 days, or if after an
adjournment a new record date is fixed for the adjourned meeting, notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote
thereat.
(e) The shareholders present at a duly called meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
3.07 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. Any proxyholder shall be authorized to sign, on the shareholder's
behalf, any written consent for shareholder action taken in lieu of a meeting.
Such proxy shall be filed with the Secretary of the Company before or at the
time of the meeting. No proxy shall be valid after the expiration of six (6)
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months from the date of its execution, unless coupled with an interest, or
unless the person executing it specifies therein the length of time for which it
is to continue in force, which in no case shall exceed three (3) years from the
date of its execution.
3.08 Voting of Shares. At any shareholders meeting every shareholder having
the right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law, by the Articles or in the Board resolution
authorizing the issuance of shares, each shareholder of record shall be entitled
to one vote (on each matter submitted to a vote) for each share of capital stock
registered in his, her or its name on the Company's books. Except as otherwise
provided by law or by the Articles, all matters submitted to the shareholders
for approval shall be determined by a majority of the votes cast (not counting
abstentions) at a legal meeting commenced with a quorum.
3.09 Voting of Shares by Certain Holders. Neither treasury shares, nor
shares of its own stock held by the Company in a fiduciary capacity, 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 Company,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by such officer, 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.
Shares held by an administrator, executor, personal representative,
guardian, or conservator may be voted by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing in the name of
a trustee may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without a transfer of such shares
into his name.
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 his name if authority to do so be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
3.10 Chairman. The Chairman of the Board of Directors of the Company, if
there is one, or in his absence, the President, shall act as chairman at all
meetings of shareholders.
3.11 Manner of Shareholder Voting. Voting at any shareholders' meeting
shall be oral or by show of hands; provided, however, that voting shall be by
written ballot if such demand is made by any shareholder present in person or by
proxy and entitled to vote.
3.12 Informal Action by Shareholders; Record Date. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by shareholders holding at
least a majority of the voting power, except that if a different proportion of
voting power is required for such an action at a meeting, then that proportion
of written consents is required. Such a consent must be filed with the minutes
of the proceedings of shareholders and shall have the same force and effect as a
vote of the shareholders, and may be stated as such in any document filed with
the Secretary of State of Nevada under the General Corporation Law of Nevada.
Written notice of such action shall be given to all shareholders who have not
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consented in writing to the action taken. The record date for determining
shareholders entitled to consent to corporate actions in writing without a
meeting (the "consent record date") shall not precede, and shall not be more
than ten (10) days after, the date upon which the resolution fixing the record
date was adopted. However, if no consent record date is fixed, the consent
record date shall be, respectively, (i) if prior action by the Board of
Directors is required under the General Corporation Law of Nevada for the
consent to be validly taken, the close of business on the day on which the Board
of Directors adopts the resolution taking such prior action; and (ii) if prior
action by the Board of Directors is not required, the first date on which a
properly signed and dated consent setting forth the action taken or proposed to
be taken is delivered as required above.
3.13 Presiding Officers; Order of Business. (a) Shareholders meetings shall
be presided over by the Chairman of the Board; or if the Chairman (and Vice
Chairman) is not present, by the President; or if the President is not present,
by a Vice President; or if a Vice President is not present, by such person
chosen by the Board of Directors; or if none, by a chairperson to be chosen at
the meeting by shareholders present in person or by proxy who own a majority of
the voting power present. The Secretary of a shareholders meeting shall be the
Secretary of the Company; or if the Secretary is not present, an Assistant
Secretary; or if an Assistant Secretary is not present, such person as may be
chosen by the Board of Directors; or if none, by such person who is chosen by
the chairperson at the meeting.
(b) The following order of business, unless otherwise ordered at the
shareholders meeting by the chairperson thereof, shall be observed as far as
practicable and consistent with the purposes of the meeting:
1. Calling of the shareholders' meeting to order.
2. Presentation of proof of mailing of the notice of the meeting and, if
a special meeting, the call thereof.
3. Presentation of proxies.
4. Determination and announcement that a quorum is present.
5. Reading and approval (or waiver thereof) of the minutes of the
previous meeting of shareholders.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual meeting or a
meeting called for such purpose.
8. Consideration of the specific purpose or purposes for which the
meeting has been called, other than election of directors.
9. Transaction of such other business as may properly come before the
meeting.
10. Adjournment.
3.14 Annual Report. The President of the Company shall prepare an annual
report which will set forth a statement of affairs of the Company as of the end
of its last fiscal year, including a balance sheet, an income statement and a
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statement of changes in financial position, which need not be audited, and
present them at the annual meeting of shareholders. Failure to prepare or
present an annual report shall not affect the validity of any shareholder
meeting. No such report need be prepared or presented for any fiscal year in
which the Company was inactive. This Section shall not apply as to any fiscal
year if the Company (i) was at the year end subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, and
subsequently furnishes to the shareholders an annual report or report on Form
10-K under such Act covering such fiscal year, or (ii) furnishes to shareholders
an Information Statement which conforms to the requirements of Rule 15c2-11 of
the Securities and Exchange Commission.
ARTICLE IV
Directors, Powers and Meetings
4.01 General Powers. All corporate powers shall be exercised, and the
Company's business and affairs shall be managed, by or under the authority of
its Board of Directors, except as otherwise provided in the General Corporation
Law of Nevada or the Charter.
4.02 Number, Tenure and Qualifications. The Company's Board of Directors
shall consist of not less than one (1) and not more than seven (7) Directors, as
resolved from time to time by the Board of Directors. If such number is not so
fixed, the Company shall have one Director. Directors shall be elected at each
annual meeting of shareholders, except as otherwise provided below. Each
Director shall hold office until the next annual meeting of shareholders and
thereafter until his successor shall have been elected and duly qualified.
Directors need not be residents of Nevada or shareholders of the Company.
Directors shall be elected by plurality vote. At least one-fourth in number of
the Directors must be elected annually. No decrease in the number of Directors
shall shorten the term of any incumbent Director.
4.03 Vacancies; Resignation. (a) Any vacancy occurring in the Board of
Directors, except resulting from an increase in the number of directors, may be
filled by the affirmative vote of a majority of the remaining Directors, though
less than a quorum, or by a sole remaining Director. A Director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
Directors shall be filled by the affirmative vote of a majority of the entire
board or by a majority of the total voting power at any annual meeting or at a
special meeting of shareholders called for that purpose, or by means of written
shareholder consents taken in lieu of a meeting. Every director chosen to fill a
vacancy as provided in this Section shall hold office until the next annual
meeting of shareholders or until his successor has been elected and qualified.
(b) Any Director may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President or the Secretary of the Company.
Unless otherwise specified in such written notice, a resignation shall take
effect upon delivery to the Board or the designated officer. A resignation need
not be accepted in order for it to be effective.
4.04 Removal of Directors. Any Director may be removed only by the
shareholders in the manner provided in the Company's Charter and, if no such
provision appears therein, then as provided by law. Such action may be taken at
any special meeting called for that purpose or by means of written shareholder
consents. In case any vacancy so created shall not be filled by the shareholders
at such meeting or in the written consent effecting removal, such vacancy may be
filled by a majority of the Board of Directors.
4.05 Place of Meetings. The Board of Directors may hold both regular and
special meetings either within or without the State of Nevada, at such place as
the Board of Directors from time to time deems advisable.
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4.06 Regular Meetings. A regular meeting of the Board of Directors shall be
held without other notice than these Bylaws immediately after and at the same
place as the annual meeting of shareholders. The Board of Directors may provide
by resolution the time and place for the holding of additional regular meetings
without other notice than such resolution; provided, that any Director not
present when any such resolution is passed is given notice of the resolution.
4.07 Special Meetings. A special meeting of the Board of Directors shall be
held without other notice than these Bylaws immediately after and at the same
place as every special meeting of shareholders. Special meetings of the Board of
Directors also may be called by or at the request of the Chairman of the Board,
the President, or any two Directors upon two days' notice to each director if
such notice is delivered personally or sent by telegram, or upon five days'
notice if sent by mail.
4.08 Telephonic Meetings. One or more members of the Board of Directors or
any committee designated by the Board may participate in a meeting of the Board
of Directors or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear one another at the same time. Such participation shall constitute presence
in person at the meeting. All participants in any meeting of Directors, by
virtue of their participation and without further action on their part, shall be
deemed to have consented to the recording of such meeting by electronic device
or otherwise, and to the making of a written transcript thereof, in order that
minutes thereof shall be available for the Company's records.
4.09 Notice. Except as otherwise provided above, notice of the time, date
and place, of every special meeting of Directors or any committee thereof shall
be given. 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,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
4.10 Quorum; Adjournments. A majority of the number of directors then in
office, present in person or by means of conference telephone or similar
equipment, shall constitute a quorum for the transaction of business at every
Board meeting, and the act of the majority of the Directors present at a meeting
at which a quorum is present shall be the act of the Board of Directors, except
as may otherwise specifically be provided by law, the Charter or these Bylaws.
If a quorum is not present at any Board meeting, the directors present may
adjourn the meeting, from time to time, without notice other than announcement
of the meeting, until a quorum is present.
4.11 Compensation. Directors shall be entitled to such compensation for
their services as directors as from time to time may be fixed by the Board and
shall be entitled to reimbursement of all reasonable expenses incurred by them
in attending Board meetings. A director may waive compensation for any Board
meeting. No director who receives compensation as a director shall be barred
from serving the Company in any other capacity or from receiving compensation
and reimbursement of reasonable expenses for any or all such other services.
4.12 Presumption of Assent. A Director of the Company who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
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written dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof, or shall forward such dissent by
registered or certified mail, first class, postage prepaid, to the Secretary of
the Company, provided such mailing is postmarked within ten calendar days after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
4.13 Action by Directors Without Meeting. Any action required to be taken
at a meeting of the Directors of the Company or of a committee of Directors or
any action which may be taken at such a meeting, may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the Directors entitled to vote with respect to the subject matter
thereof. A consent shall be sufficient for this Section if it is executed in
counterparts, in which event all of such counterparts, when taken together,
shall constitute one and the same consent.
4.14 Bank Accounts, etc. Anything herein to the contrary notwithstanding,
the Board of Directors may, except as may otherwise be required by law,
authorize any officer or officers, agent or agents, in the name of and on behalf
of the Company, to sign checks, drafts, or other orders for the payment of money
or notes or other evidences of indebtedness, to endorse for deposit, deposit to
the credit of the Company at any bank or trust company or banking institution in
which the Company may maintain an account or to cash checks, notes, drafts, or
other bankable securities or instruments, and such authority may be general or
confined to specific instances, as the Board of Directors may elect.
4.15 Inspection of Records. Every Director shall have the absolute right at
any reasonable time to inspect all books, records, documents of every kind, and
the physical properties, of the Company and of its subsidiaries. Such inspection
may be made personally or by an agent and includes the right to make copies and
extracts.
4.16 Executive Committee. (a) The Board of Directors may, by resolution
adopted by a majority of the whole Board, appoint two or more of its members to
constitute an Executive Committee. One of such directors shall be designated as
Chairman of the Executive Committee. Each member of the Executive Committee
shall continue as a member thereof until the expiration of his term as a
director, or until his earlier resignation from the Executive Committee, in
either case unless sooner removed as a director or member of the Executive
Committee by any means authorized by the Charter or herein.
(b) The Executive Committee shall have and may exercise, to the extent
provided in such resolution and except as prohibited by law, all of the rights,
power and authority of the Board of Directors.
(c) The Executive Committee shall fix its own rules of procedure and shall
meet at such times and at such place or places as may be provided by its rules.
The Chairman of the Executive Committee, or in the absence of the Chairman, a
member of the Executive Committee chosen by a majority of the members present,
shall preside at all meetings of the Executive Committee, and another member
thereof chosen by the Executive Committee shall act as Secretary. A majority of
the Executive Committee shall constitute a quorum for the transaction of
business, and the affirmative vote of a majority of the members thereof shall be
required for any action of the Executive Committee. The Executive Committee
shall keep minutes of its meetings and deliver such minutes to the Board of
Directors.
4.17 Other Committees. The Board of Directors may, by resolution duly
adopted by a majority of directors at a meeting at which a quorum is present,
appoint an audit committee, compensation committee, and such other committee or
committees as it shall deem advisable and with such limited authority as the
Board of Directors shall from time to time determine.
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4.18 Other Provisions Regarding Committees. (a) The Board of Directors
shall have the power at any time to fill vacancies in, change the membership of,
or discharge any committee. The members of any committee present at any meeting
of a committee, whether or not they constitute a quorum, may appoint a director
to act in the place of an absent member.
(b) Members of any committee shall be entitled to such compensation for
their services as such as from time to time may be fixed by the Board of
Directors and in any event shall be entitled to reimbursement of all reasonable
expenses incurred in attending committee meetings. Any member of a committee may
waive compensation for any meeting. No member of a committee who receives
compensation as a member of one or more committees shall be barred from serving
the Company in any other capacity or from receiving compensation and
reimbursement of reasonable expenses for any or all such other services.
(c) Unless otherwise prohibited by law, the provisions above concerning
action by written consent of directors and meetings of directors by telephonic
or similar means shall apply to all committees from time to time created by the
Board of Directors.
ARTICLE V
Officers and Agents
5.01 Positions. The Company's officers generally shall be chosen by the
Board of Directors and shall consist of a Chairman of the Board, a President,
one or more Vice Presidents if desired, a Secretary and a Treasurer. The Board
of Directors may appoint one or more other officers, assistant officers and
agents as it from time to time deems necessary or appropriate, who shall be
chosen in such manner and hold their offices for such terms and have such
authority and duties as from time to time may be determined by the Board of
Directors. The Board may delegate to the Chairman of the Board the authority to
appoint any officer or agent of the Company and to fill a vacancy other than the
Chairman of the Board or President. Any two or more offices may be held by the
same person, except that no person may simultaneously hold the offices of
President and Secretary and of President and Vice President. In all cases where
the duties of any officer, agent or employee are not prescribed by these bylaws
or by the Board of Directors, such officer, agent or employee shall follow the
orders and instructions of the President.
5.02 Term of Office; Removal. Each officer of the Company shall hold office
at the pleasure of the Board and any officer may be removed, with or without
cause, at any time by the affirmative vote of a majority of the directors then
in office; provided, that any officer appointed by the Chairman of the Board
pursuant to authority delegated by the Board may be removed, with or without
cause, at any time by the Chairman whenever the Chairman in his or her absolute
discretion shall consider that the Company's best interests shall be served by
such removal. Removal of an officer by the Board (or the Chairman, as the case
may be) shall not prejudice the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not in itself
create contract rights.
5.03 Vacancies. A vacancy in any office, however occurring, may be filled
by the Board or the Executive Committee, for the unexpired portion of the term
by majority vote of its members, or by the Chairman of the Board in the case of
a vacancy occurring in an office to which the Chairman has been delegated
authority to make appointments.
5.04 Compensation. The salaries of all officers of the Company shall be
fixed from time to time by the Board, and no officer shall be prevented from
receiving a salary by reason of the fact that he also receives compensation from
the Company in any other capacity.
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5.05 Chairman of the Board. The Chairman of the Board ("Chairman"), if such
officer shall be chosen by the Board of Directors, shall preside at all meetings
of the Board of Directors and meetings of shareholders at which he is present
and shall exercise general supervision and direction over the implementation of
Board policy affecting the affairs of the Company. Any act which may be
performed by the Chief Executive Officer or President may be performed by the
Chairman.
5.06 Chief Executive Officer; Chief Operating Officer. The Chairman of the
Board shall, unless the Board determines otherwise, serve as the Chief Executive
Officer ("CEO") of the Company. If the Chairman is not designated the CEO, then
the President shall serve as CEO. The Board may, from time to time, designate
from among the executive officers of the Company an officer to serve as Chief
Operating Officer ("COO") of the Company. If the Chairman serves as the CEO,
then the President shall serve as COO. If the President is designated CEO, then
the Executive Vice President (or if there is none, then the next most senior
Vice President) shall serve as COO. A person designated to serve in the capacity
of CEO or COO shall serve at the pleasure of the Board.
A person designated Chief Executive Officer (CEO) shall have primary
responsibility for and active charge of the management and supervision of the
Company's business and affairs. The CEO may execute in the name of the Company
authorized corporate obligations and other instruments, shall perform such other
duties as may be prescribed by the Board (or Chairman, as the case may be) from
time to time and, in the absence or disability of the President, shall exercise
all of the duties and powers of the President. In the event that the President
is not the CEO, then the CEO shall supervise the performance of the President
and shall be responsible for the execution of the policies and directives of the
Board. The CEO shall report directly to the Board. The CEO shall perform such
other duties as may be assigned by the Board (or Chairman, as the case may be).
The CEO may perform any act which might be performed by the President.
A person designated Chief Operating Officer (COO) shall be responsible for
the day-to-day management of the Company's operations, subject to the authority
of the CEO. The COO shall report directly to the CEO of the Company and shall
consult with the CEO on all matters of corporate policy and material business
activities of the Company. The COO shall perform such other duties as may be
assigned by the Board or the CEO.
5.07 President. The President shall have general active management of the
business of the Company, subject to the authority of the Chief Executive Officer
if the President is not designated as such, and general supervision of its
officers, agents and employees. In the absence of the Chairman and Chief
Executive Officer, he shall preside at all meetings of the shareholders and of
the Board. In the absence of a designated Chief Executive Officer he shall see
that all policies and directives of the Board are carried into effect.
He shall, unless otherwise directed by the Board of Directors, attend in
person or by substitute appointed by him, or shall execute in behalf of the
Company written instruments appointing a proxy or proxies to represent the
Company, at all meetings of the stockholders of any other company in which the
Company shall hold any stock. He may, on behalf of the Company, in person or by
substitute or by proxy, execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the President,
in person or by substitute or proxy as aforesaid, may vote the stock so held by
the Company and may execute written consent and other instruments and power
incident to the ownership of said stock, subject however to the instructions, if
any, of the Chairman or the Board of Directors. The President shall have custody
of the Treasurer's bond, if any.
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5.08 Executive Vice President. The Executive Vice President shall assist
the President in the discharge of supervisory, managerial and executive duties
and functions. In the absence of the President or in the event of his death, or
inability or refusal to act, the Executive Vice President shall perform the
duties of the President and when so acting shall have the duties and powers of
the President. He shall perform such other duties as from time to time may be
assigned to him by the President, Chairman or Board of directors.
5.09 Vice Presidents. The Vice Presidents, if any, shall assist the
President and Executive Vice President and shall perform such duties as may be
prescribed by the Board, the Chairman or the President. Vice Presidents in the
order of their seniority shall, in the absence or disability of the Chairman and
President, exercise all of the duties and powers of such officers. The Executive
Vice President, if any, shall be the most senior of Vice Presidents, and the
Senior Vice President, if any, shall be the next most senior of Vice Presidents.
In regard to other Vice Presidents, they shall have the respective ranks
designated by the Board of Directors, or if none has been so designated, as
designated by the Chairman, or if none has been so designated by the Chairman,
they shall rank in the order of their respective elections to such office. The
execution of any instrument on the Company's behalf by a Vice President shall be
conclusive evidence, as to third parties, of his authority to act in the stead
of the President and Executive Vice President.
5.10 Secretary. The Secretary shall: (i) keep the minutes of the
proceedings of the shareholders and the Board of Directors and record all votes
and proceedings thereof in a book kept for that purpose; (ii) see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; (iii) be custodian of the corporate records and of the seal of
the Company and affix the seal to all documents when authorized by the Board of
Directors; (iv) keep at its registered office or principal place of business
within or outside Delaware a record containing the names and addresses of all
shareholders and the number and class of shares held by each, unless such a
record shall be kept at the office of the Company's transfer agent or registrar;
(v) sign with the President, or a Vice President, certificates for shares of the
Company, the issuance of which shall have been authorized by resolution of the
Board of Directors; (vi) have general charge of the stock transfer books of the
Company, unless the Company has a transfer agent; and (vii) in general, perform
all duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him by the President or the Board of Directors.
The Board of Directors may give general authority to officers other than the
Secretary or any Assistant Secretary to affix the Company's seal and to attest
the fixing thereof by his or her signature.
5.11 Assistant Secretary. The Assistant Secretary, if any (or if there is
more than one, the Assistant Secretaries in the order designated, or in the
absence of any designation, in the order of their appointment), in the absence
or disability of the Secretary, shall perform the duties and exercise the powers
of the Secretary. The Assistant Secretary(ies) shall perform such other duties
and have such other powers as from time to time may be prescribed by the Board,
the Chairman or the Chief Executive Officer. The Chairman may appoint one or
more Assistant Secretary(ies) to office.
5.12 Treasurer. The Treasurer shall, unless the Board otherwise resolves,
be the principal financial officer and principal accounting officer of the
Company and shall have the care and custody of all funds, securities, evidence
of indebtedness and other valuable effects of the Company, shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Company and shall deposit all money and other valuable effects of the Company in
the name and to the credit of the Company in such depositories as from time to
time may be designated by the Board. The Treasurer shall disburse the funds of
the Company in such manner as may be ordered by the Board from time to time and
shall render to the Chairman of the Board, the President and the Board, at
regular Board meetings or whenever any of them may so require, an account of all
transactions and of the Company's financial condition.
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5.13 Assistant Treasurer. The Assistant Treasurer, if any (or if there is
more than one, the Assistant Treasurers in the order designated, or in the
absence of any designation, in the order of their appointment), in the absence
or disability of the Treasurer, shall perform the duties and exercise the powers
of the Treasurer. The Assistant Treasurer(s) shall perform such other duties and
have such other powers as from time to time may be prescribed by the Board, the
Chairman or the Chief Executive Officer. The Chairman may appoint one or more
Assistant Treasurer(s) to office.
5.14 Resignations. Any officer may resign at any time by giving written
notice to the Board or to the Chairman. Such resignation shall take effect at
the time specified therein and, unless specified therein, no acceptance of the
resignation shall be required for the resignation to be effective.
5.15 Delegation of Duties. In the event of the absence or disability of any
officer of the Company, or for any other reason the Board shall deem sufficient,
the Board may temporarily designate the powers and duties, or particular powers
and duties, of such officer to any other officer, or to any director.
5.16 Fidelity Bonds. The Board of Directors shall have the power, to the
extent permitted by law, to require any officer, agent or employee of the
Company to give bond for the faithful discharge of his duties in such form and
with such surety or sureties as the Board deems advisable.
ARTICLE VI
Indemnification
Every Director, officer, employee and agent of the Company, and every
person serving at the Company's request as a director, officer (or in a position
functionally equivalent to that of officer or director), employee or agent of
another corporation, partnership, joint venture, trust or other entity, shall be
indemnified to the extent and in the manner provided by the Company's Charter,
as it may be amended, and in the absence of any such provision therein, in
accordance with Nevada law.
ARTICLE VII
Execution of Instruments and Deposit of Corporate Funds
7.01 Execution of Instruments Generally. The Chairman of the Board, the
President, any Vice President, the Secretary or the Treasurer, subject to the
approval of the Board of Directors,may enter into any contract or execute and
deliver any instrument in the name and on behalf of the Company. The Board of
Directors may authorize any officer or officers, or agent or agents, to enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Company, and such authorization may be general or confined to
specific instances.
7.02 Borrowing. Unless and except as authorized by the Board of Directors,
no loans or advances shall be obtained or contracted for, by or on behalf of the
Company, and no negotiable paper shall be issued in its name. Such authorization
may be general or confined to specific instances. Any officer or agent of the
Company thereunto so authorized may attain loans and advances for the Company
and for such loans and advances may make, execute and deliver any promissory
notes, bonds, or other evidences of indebtedness of the Company. Any officer or
agent of the Company so authorized may pledge, hypothecate or transfer as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Company, any and all stocks, bonds other securities and other
personal property at any time held by the Company, and to that end may endorse,
assign and deliver the same and do every act and thing necessary or proper in
connection therewith.
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7.03 Deposits. All funds of the Company not otherwise employed shall be
deposited from time to time to its credit in such banks or trust companies or
with such bankers or other depositaries as the Board of Directors may select, or
as may be selected by any officer or officers or agent or agents authorized to
do so by the Board of Directors. Endorsements for deposit to the credit of the
Company in any of its duly authorized depositaries shall be made in such manner
as the Board of Directors from time to time may determine.
7.04 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, and all notes or other evidence of indebtedness issued in the
name of the Company, shall be signed by such officer or officers or agent or
agents of the Company and in such manner as the Board of Directors from time to
time may determine.
7.05 Proxies. Proxies to vote with respect to shares of stock of other
corporations owned by, or standing in the name of, the Company may be executed
and delivered from time to time on behalf of the Company by the Chairman of the
Board, the President or any Vice President or by any other person or persons
thereunto authorized by the Board of Directors.
ARTICLE VIII
Miscellaneous
8.01 Declaration of Dividends. The Board of Directors at any regular or
special meeting may declare dividends payable, whenever in the exercise of its
discretion it may deem such declaration advisable and such is permitted by law.
Such dividends may be paid in cash, property, or shares of the Company.
8.02 Benefit Plans. Directors shall have the power to install and authorize
any pension, profit sharing, stock option, stock award or stock bonus,
insurance, welfare, educational, bonus, health and accident or other benefit
program which the Board deems to be in the interest of the Company, at the
expense of the Company, and to amend or revoke any plan so adopted. Any such
plan may adopted and have full force and effect by resolution of the Board of
Directors, except where applicable laws, rules or regulations require prior
approval of the Company's shareholders of such plan in order for the plan to be
valid.
8.03 Seal. The corporate seal of the Company shall be circular in form and
shall contain the name of the Company, the year incorporated and the words
"Seal" and "Nevada".
8.04 Fiscal Year. The Board of Directors shall have the power to fix, and
from time to time change, the fiscal year of the Company. Any such adoption of
or change in a fiscal year shall not constitute or require an amendment to these
Bylaws.
8.05 Amendment of Bylaws. These Bylaws may be amended or repealed in the
manner provided for in the Charter, or if none is there provided: by majority
vote of the Board of Directors, taken at any meeting or by written consent,
subject to the shareholders' right to change or repeal any Bylaws so made or
adopt new Bylaws by vote of at least a majority of the total voting power.
Bylaws amendments may be proposed by any Director or shareholder. Any action
duly taken by the Board or the shareholders which conflicts or is inconsistent
with these Bylaws (as they may be amended) shall constitute an amendment of the
Bylaws, if the action was taken by such number of directors or shares voting as
would be sufficient for amendment of the Bylaws.
8.06 Gender. The masculine gender is used in these Bylaws as a matter of
convenience only and shall be interpreted to include the feminine and neuter
genders as the circumstances indicate.
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8.07 Conflicts. In the event of any irreconcilable conflict between these
Bylaws and either the Company's Charter or applicable law, the latter shall
control.
8.08 Definitions. Except as these Bylaws otherwise specifically provide,
all terms used in these Bylaws shall have the definitions given them in the
Company's Charter or the Nevada General Corporation Law.
ARTICLE IX
Notices
9.01 Receipt of Notices by the Company. Notices, shareholder writings
consenting to action, and other documents or writings shall be deemed to have
been received by the Company when they are actually received: (i) at the
registered office of the Company in Nevada; (ii) at the principal office of the
Company (as designated in the most recent document filed by the Company with the
Nevada Secretary of State designating a principal office) addressed to the
attention of the Secretary of the Company; (iii) by the Secretary of the Company
wherever the Secretary may be found; or (iv) by any other person authorized from
time to time by the Board of Directors or the President to receive such
writings, wherever such person is found.
9.02 Giving of Notice. Except as otherwise provided by the General
Corporation Law of Nevada, these Bylaws, the Charter or resolution of the Board
of Directors, every meeting notice or other notice, demand, bill, statement or
other communication (collectively, "Notice") from the Company to a Director,
Officer or shareholder shall be duly given if it is written or printed and is
(i) sent by first class or express mail, postage prepaid, (ii) sent by any
commercial overnight air courier service, such as DHL, Federal Express, Emery,
Airborne, UPS or similar service, (iii) sent by telegraph, cablegram, telex,
telecopier, facsimile or similar transmission, (iv) delivered by any commercial
messenger service which regularly retains its receipts, or (v) personally
delivered, provided a receipt is obtained reflecting the date of delivery.
Notice shall not be duly given unless all delivery or postage charges are
prepaid. Notice shall be given to an addressee's most recent address as it
appears on the Company's records or to such other address as has been provided
in writing to the Secretary. A Notice shall be deemed "given" when dispatched
for delivery, when personally delivered, when transmitted electronically, or if
mailed, on the date postmarked. This Section shall not have the effect of
shortening any notice period provided for in these Bylaws.
9.03 Waiver of Notice. Any Notice required or permitted by the General
Corporation Law of Nevada, the Charter or these Bylaws may be waived in writing
at any time by the person entitled to the Notice, and such waiver shall be
equivalent to the giving of notice. Notice of any shareholders' meeting shall be
waived by attendance, in person or by proxy, at the meeting, unless any question
of lack of or defect in a Notice is raised prior to conclusion of the meeting. A
waiver of Notice of a special meeting of shareholders shall state the purpose
for which the meeting was called or the business to be transacted thereat.
APPROVED AND ADOPTED by the Board of Directors as of April 2, 1999.
* * *
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SECRETARY'S CERTIFICATION
I, the undersigned Secretary of this corporation, hereby certify that the
foregoing Bylaws were duly adopted by its Board of Directors on the date above
indicated and that the foregoing text of the Bylaws are currently in full force
and effect and have not been revoked, suspended or amended since adoption
thereof.
Dated: April 2, 1999
GALLAGHER RESEARCH CORPORATION
By /s/ Jennifer S. Myers
------------------------------
Secretary
(SEAL)
16
Exhibit 4.1
CUSIP 36357M 10 4
NUMBER SHARES
------ ------
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
GALLAGHER RESEARCH CORPORATION
The Corporation is authorized to issue 50,000,000 Common Shares -
$.001 Par Value
This Certifies that______________________________________________________ is the
registered holder of __________________________________________________ Shares
Fully paid and non-assessable
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed
this ____________ day of _______________________ A.D., ____________
- ----------------------------- ----------------------------------
Secretary President
[Corporate seal omitted]
<PAGE>
For Value Received, ________________ hereby sell, assign and transfer unto
________________________________ ____________________________Shares represented
by the within Certificate, and do hereby irrevocably constitute and appoint
___________________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________
In the presence of ______________________________________
______________________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Exhibit 10.1
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
1997 COMPENSATORY STOCK OPTION PLAN
1. Purpose of this Plan.
This Compensatory Stock Option Plan ("Plan") is intended as an employment
incentive, to aid in attracting and retaining in the employ or service of
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY ("Company"), a Colorado corporation,
and any Affiliated Company, persons of experience and ability and whose services
are considered valuable, to encourage the sense of proprietorship in such
persons, and to stimulate the active interest of such persons in the development
and success of the Company. This Plan provides for the issuance of non-statutory
stock options ("CSOs" or "Options") which are not intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"). Certain other terms also are defined
in Paragraph 17 and elsewhere of this Plan.
2. Administration of this Plan.
The Company's Board of Directors ("Board") may appoint and maintain as
administrator of this Plan the Compensation Committee ("Committee") of the Board
which shall consist of at least two members of the Board who are Non-Employee
Directors as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended ("Exchange Act"). At any time that the Committee is not duly
constituted, the Board itself shall have and fulfill the duties herein allocated
to the Committee. The Committee shall have full power and authority to designate
Plan participants, to determine the provisions and terms of respective CSOs
(which need not be identical as to number of shares covered by any CSO, the
method of exercise as related to exercise in whole or in installments, or
otherwise), including the CSO price, and to interpret the provisions and
supervise the administration of this Plan. The Committee may in its discretion
provide that certain CSOs not vest (that is, become exercisable) until
expiration of a certain period after issuance or until other conditions are
satisfied, so long as not contrary to this Plan.
A majority of the members of the Committee shall constitute a quorum. All
decisions and selections made by the Committee pursuant to this Plan's
provisions shall be made by a majority of its members. Any decision reduced to
writing and signed by all of the members shall be fully effective as if it had
been made by a majority at a meeting duly held. The Committee shall select one
of its members as its chairman and shall hold its meetings at such times and
places as it deems advisable. Each Option shall be evidenced by a written
agreement containing terms and conditions established by the Committee
consistent with the provisions of this Plan.
3. Designation of Participants.
Only Employees shall be eligible for participation in this Plan. The
Committee shall have full power to designate, from among eligible individuals,
the persons to whom CSOs may be granted. A person who has been granted a CSO
hereunder may be granted an additional CSO or CSOs, if the Committee shall so
determine. Persons eligible under this Plan additionally may be granted one or
more options under any other compensation or stock option plan or awarded shares
under any other benefit plan of the Company. No Option shall confer any right
upon the Optionee with respect to the continuation of his employment (or his
position as an officer, director, employee or consultant) with the Company or
any Affiliated Company, and shall not interfere with the right of the Company or
any Affiliated Company to terminate such relationship(s) at any time in
accordance with law and any agreements then in force.
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4. Stock Reserved for this Plan.
Subject to adjustment as provided in Paragraph 9 below, a total of
1,000,000 shares of Common Stock of the Company ("Option Stock" or "Option
Shares") shall be subject to this Plan. The Option Stock subject to this Plan
shall consist of unissued shares of Common Stock or previously issued shares of
Common Stock reacquired and held by the Company or any Affiliated Company, and
such number of Option Shares shall be and is hereby reserved for sale for such
purpose. Any Option Shares which may remain unsold and which are not subject to
outstanding CSOs at the termination of this Plan shall cease to be reserved for
the purpose of this Plan, but until termination of this Plan the Company shall
at all times reserve a sufficient number of shares to meet the requirements of
this Plan. Should any CSO expire or be cancelled prior to its exercise in full,
the unexercised Option Shares theretofore subject to such CSO may again be
subjected to a CSO under this Plan.
5. Option Exercise Price.
The purchase (exercise) price of each share of Option Stock made subject to
an Option shall not be less than eighty-five percent (85%) of the Fair Market
Value of a share of Common Stock on the date the Option is granted. For purposes
of this Plan, the "Fair Market Value" of a share of the Company's Common Stock
as of a given date shall be: (i) the closing price of a share of the Company's
Common Stock on the principal exchange, NASDAQ system, NASDAQ Small Cap Market,
or other quotation medium, on which shares of the Company's Common Stock are
then trading or quoted, or (ii) if the Company's Common Stock is not publicly
traded, the fair market value established by the Committee acting in good faith.
The cash proceeds from the sale of Option Stock are to be added to the general
funds of the Company.
6. Exercise Period; Vesting. (a) An Option shall have a term of not more
than ten (10) years from the date of grant and shall automatically terminate:
(i) Upon termination of the Optionee's employment with the Company for
cause;
(ii) At the expiration of a period to be determined by the Committee at the
time of grant which is not to exceed six (6) months following the date
of termination of the Optionee's employment with the Company without
cause for any reason other than death; provided, that if no such
period is specified in the Option, the Option shall automatically
terminate thirty (30) days following termination of Optionee's
employment; provided, further, that if the Optionee dies within such
period, subclause (iii) below shall apply; or
(iii) At the expiration of twelve (12) months after the date of death of
the Optionee; provided, that the Committee may in its discretion
provide that any Option not be exercisable after the Optionee's death
or may be exercised for a period less than twelve months.
(iv) Unless otherwise specified in the Option, if termination is due to the
Optionee's "permanent and total disability" within the meaning of
Section 422(c)(6) of the Code, an Option may be exercised at any time
within twelve (12) months following termination of employment or
relationship as a consultant or director.
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(b) "Employment with the Company" as used in this Plan shall include
employment or relationship as a consultant, adviser or director with the Company
or any Affiliated Company in any such capacity, even if employment or engagement
in another capacity ceases. Options granted under this Plan shall not be
affected by an employee's transfer of employment among the Company and any one
or more Affiliated Companies. An Optionee's employment with the Company shall
not be deemed interrupted or terminated by a bona fide leave of absence (such as
sabbatical leave or employment by the Government) duly approved, military leave
or sick leave. As to consultants, advisers or other non-employee providers of
services, employment with the Company shall be deemed to cease upon formal
termination of the Optionee's engagement.
(c) Each Option may be made exercisable (that is, vest) in whole or in
installments, cumulative or otherwise, during its term, or subject to other
restrictions or limitations. Unless otherwise set forth in the granting
resolution, an Option shall vest immediately upon grant. If an Option is made to
vest over time, any portion not vested at the time of termination of employment
or relationship as a director or consultant with the Company shall lapse as if
never granted. Nothing contained in this Section shall be construed to extend
the term of any Option or to permit anyone to exercise an Option after
expiration of its term, nor shall it be construed to increase the number of
shares as to which any Option is exercisable from the amount exercisable on the
date of termination of the Optionee's employment or relationship as a consultant
or director.
7. Exercise of Options.
(a) The Committee, in granting CSOs, shall have discretion to determine the
terms upon which CSOs shall be exercisable, subject to applicable provisions of
this Plan. Once available for purchase, unpurchased Option Shares shall remain
subject to purchase until the CSO expires or terminates in accordance with
Paragraph 6 above. Unless otherwise provided in the CSO, a CSO may be exercised
in whole or in part, one or more times, but no CSO may be exercised for a
fractional share. Resulting fractions shall be rounded up or down, as
appropriate.
(b) CSOs may be exercised solely by the Optionee or a permitted transferee
during his lifetime or by a spouse or former spouse pursuant to a qualified
domestic relations order, or if the Option permits, after his death (with
respect to the number of shares which the Optionee could have purchased at the
time of death) by the person or persons entitled thereto under the decedent's
will or the laws of descent and distribution.
(c) The purchase price of the Option Shares as to which a CSO is exercised
shall be paid or delivered in full at the time of exercise and no Option Shares
shall be issued until full payment is made therefor. Payment shall be made by
any one or more of the following means:
(i) in cash, represented by bank or cashier's check, certified check or
money order, or made by bank wire transfer;
(ii) by offsetting against the purchase price a cash obligation of the
Company which is both liquidated (meaning the dollar amount is fixed
and known or easily determinable) and uncontested;
(iii) with the prior approval of the Committee, by delivering shares of the
Company's Common Stock which have been beneficially owned by the
Optionee, the Optionee's spouse or both of them, for a period of at
least six (6) months prior to the time of exercise (the "Delivered
Stock"), the Delivered Stock to be valued by the Committee in good
faith at its Fair Market Value on the date of exercise;
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(iv) with the prior approval of the Committee, by delivery of shares of
corporate stock which are freely tradeable without restriction and
which are part of a class of securities which has been listed for
trading on the Nasdaq National Market System, the Nasdaq Small Cap
Market or a national securities exchange, with an aggregate Fair
Market Value on the date of exercise equal to or greater than the
exercise price of the Option Shares being purchased under the Option
("Other Shares"); or
(v) with the prior approval of the Committee, by delivering to the Company
the Optionee's personal recourse promissory note, adequately secured
by property other than the Option Shares thereby purchased, containing
such terms and conditions as the Committee shall determine.
(d) An Option shall be deemed exercised when written notice thereof,
accompanied by the appropriate payment in full, is received by the Company. No
holder of an Option shall be, or have any of the rights and privileges of, a
shareholder of the Company in respect of any Option Shares purchasable upon
exercise of an Option unless and until certificates evidencing such shares shall
have been issued by the Company to him, her or it.
(e) An Option may, but need not, provide that the Optionee may at any time
when and to the extent the Option is exercisable, effect an Option Exchange,
provided the then market price of the Common Stock exceeds the Option's exercise
price. To effect an Option Exchange, the Optionee must surrender the Option at
the Company's principal offices stating the intent to effect the Option Exchange
and the number of Option Shares being exchanged, and the Option Exchange shall
be deemed to take place on the date of the Company's receipt thereof or such
later date as the Optionee specifies in writing. In connection with any Option
Exchange, an Option shall represent the right to subscribe for and acquire the
number of Option Shares equal to [i] the number of Option Shares specified by
the Optionee in its notice of exchange (the "Total Number") LESS [ii] the number
of Option Shares equal to the quotient obtained by dividing (A) the product of
the Total Number and the exercise price by (B) the current Fair Market Value of
a share of the Common Stock on the date of exchange, or if such date is not a
trading day, on the trading day preceding. One or more certificates for the
Option Shares issuable and, if applicable, a new Option of like tenor evidencing
the balance of the Option Shares remaining subject to the Option, shall be
issued as of the exercise date.
8. Non-Transferability of Options.
No Option shall be assignable or otherwise transferable except by will or
by operation of law, pursuant to a qualified domestic relations order (as
defined in Rule 16b-3 of the Securities and Exchange Commission, or any
successor rule), or pursuant to Title I of the Employee Retirement Income
Security Act of 1974, as amended (ERISA), or rules thereunder. No CSO shall be
pledged or hypothecated in any manner, whether by operation of law or otherwise,
nor be subject to execution, attachment or similar process. The same
restrictions on transfer or assignment shall apply to any heirs, devisees,
beneficiaries, legal representatives or other persons acquiring this Option or
an interest herein under such an instrument or by operation of law. Any attempt
to transfer or otherwise dispose of an Option in contravention of its terms
shall void the Option.
9. Reorganizations and Recapitalizations of the Company.
(a) No Limit Imposed on Corporate Powers. The existence of this Plan and
Options granted hereunder shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any and all adjustments,
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recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures or other indebtedness, or any preferred or prior
preference stocks senior to or affecting the Common Stock or the rights thereof,
or the dissolution or liquidation of the Company, or any sale, exchange or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
(b) Certain Adjustments to be Made. The Option Shares with respect to which
Options may be granted hereunder are shares of the Common Stock of the Company
as currently constituted. In certain instances, the number of shares purchasable
upon exercise of Options and the exercise price shall be adjusted as provided
herein. All adjustments and made under this Section shall be made by the
Committee in good faith in its sole discretion. Every adjustment in outstanding
Options shall be made without change in the total price applicable to the
unexercised portion of the Option but with a corresponding adjustment in the
exercise price per share and number (and if applicable, kind) of shares
purchasable.
(c) Stock Splits, Stock Combinations, Etc. If, and whenever, prior to
delivery by the Company of all of the Option Shares which are subject to Options
granted hereunder, the Company shall effect a split or combination of the Common
Stock or other capital readjustment, the payment of a Common Stock dividend, or
recapitalization, reclassification or other increase or reduction of the number
of shares of the Common Stock outstanding without receiving compensation
therefor in money, services or property, then the number of Option Shares
available under this Plan and the number of Option Shares with respect to which
Options granted hereunder may thereafter be exercised shall (i) in the event of
an increase in the number of outstanding shares of Common Stock, be
proportionately increased, and the cash consideration payable per share shall be
proportionately reduced; and (ii) in the event of a reduction in the number of
outstanding shares of Common Stock, be proportionately reduced, and the cash
consideration payable per share shall be proportionately increased.
(d) Certain Other Changes In the Common Stock. If the outstanding Common
Stock shall be hereafter increased or decreased, or changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation, by reason of reorganization, merger, consolidation,
share exchange or other business combination in which the Company is the
surviving parent corporation, appropriate adjustment shall be made by the
Committee in the number and kind of shares for which Options may be granted
under the Plan. In addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding and unexercised Options
shall be exercisable, to the end that the proportionate interest of the holder
of the Option shall, to the extent practicable, be maintained as before the
occurrence of such event.
(e) Certain Defined Reorganizations. For purposes of this Section, the term
"Reorganization" shall mean any reorganization, merger, consolidation, share
exchange, or other business combination pursuant to which the Company is not the
surviving parent corporation after the effective date of the Reorganization, or
any sale or lease of all or substantially all of the assets of the Company, and
the term "Reorganization Agreement" shall mean a plan or agreement with respect
to a Reorganization. Nothing herein shall require the Company to adopt a
Reorganization Agreement, or to make provision for the adjustment, change,
conversion, or exchange of any Options, or the shares subject thereto, in any
Reorganization Agreement which it does adopt. In the event of a Reorganization
(as hereinafter defined), then,
(i) If there is no Reorganization Agreement, or if the Reorganization
Agreement does not specifically provide for the adjustment, change,
conversion, or exchange of the outstanding and unexercised options for
cash or other property or securities of another corporation, then any
outstanding and unexercised options shall terminate as of a future
date to be fixed by the Committee; or,
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(ii) If there is a Reorganization Agreement, and the Reorganization
Agreement specifically provides for the adjustment, change,
conversion, or exchange of the outstanding and unexercised options
for cash or other property or securities of another corporation, the
Committee shall adjust the shares under such outstanding and
unexercised options, and shall adjust the shares remaining under the
Plan which are then available for the issuance of options under the
Plan if the Reorganization Agreement for the adjustment, change,
conversion, or exchange of such options and shares.
(iii) The Committee shall provide to each Optionee then holding an
outstanding and unexercised Option not less than thirty (30) calendar
Days' advance written notice of any date fixed by the Committee
pursuant to this Section 13 and of the terms of any Reorganization
Agreement providing for the adjustment, change, conversion, or
exchange of outstanding and unexercised Options. Except as the
Committee may otherwise provide, each Optionee shall have the right
during such period to exercise his Option only to the extent that the
Option was exercisable on the date such notice was provided to the
Optionee.
(f) Dissolution or Liquidation. In the event of the dissolution or
liquidation of the Company, any outstanding and unexercised options shall
terminate as of a future date to be fixed by the Committee.
(g) No Adjustments to be Made. Except as expressly provided above, the
Company's issuance of shares of its capital stock of any class, or securities
convertible into shares of its capital stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into or exchangeable for shares of capital stock or
other securities of the Company, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of Option Shares subject to
CSOs granted hereunder or the purchase price of such shares.
10. Purchase for Investment.
Unless the Option Shares covered by this Plan have been registered under
the Act prior to issuance, each person exercising a CSO under this Plan may be
required by the Company to give a representation in writing that he is acquiring
such shares for his or her own account for investment and not with a view to, or
for sale in connection with, the distribution of any part thereof.
11. Effective Date and Expiration of this Plan.
This Plan shall be effective as of December 10, 1997, the date of its
adoption by the Board, and no CSO shall be granted pursuant to this Plan after
its expiration. This Plan shall expire on December 10, 2007 except as to CSOs
then outstanding, which shall remain in effect until they have expired or been
exercised.
12. Amendments or Termination.
The Committee or Board may amend, alter or discontinue this Plan at any
time in such respects as it shall deem advisable in order to conform to any
change in any other applicable law, or in order to comply with the provisions of
any rule or regulation of the Securities and Exchange Commission required to
6
<PAGE>
exempt this Plan or any CSOs granted thereunder from the operation of Section
16(b) of the Exchange Act, or in any other respect not inconsistent with Section
16(b) of the Exchange Act; provided, that no amendment or alteration shall be
made which would impair the rights of any participant under any CSO theretofore
granted, without his consent (unless made solely to conform such CSO to, and
necessary because of, changes in the foregoing laws, rules or regulations), and
except that no amendment or alteration shall be made without the approval of
shareholders which would increase the total number of shares reserved for the
purposes of this Plan (except as provided in Paragraph 9) or extend the
expiration date of this Plan as set forth in Paragraph 11.
13. Government Regulations.
This Plan, and the granting and exercise of CSOs hereunder, and the
obligation of the Company to sell and deliver Option Shares under such CSOs,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required.
14. Liability.
No member of the Board of Directors or the Committee, nor any officers,
employees or agents of the Company or any Affiliated Company shall be personally
liable for any action, omission or determination made in good faith in
connection with this Plan.
15. Options in Substitution for Other Options.
The Committee may, in its sole discretion, at any time during the term of
this Plan, grant new options to an employee under this Plan or any other stock
option plan of the Company on the condition that such employee shall surrender
for cancellation one or more outstanding options which represent the right to
purchase (after giving effect to any previous partial exercise thereof) a number
of shares, in relation to the number of shares to be covered by the new
conditional grant hereunder, determined by the Committee. If the Committee shall
have so determined to grant such new options on such a conditional basis ("New
Conditional Options"), no such New Conditional Option shall become exercisable
in the absence of such employee's consent to the condition and surrender and
cancellation as appropriate. New Conditional Options shall be treated in all
respects under this Plan as newly granted options. Options may be granted under
this Plan from time to time in substitution for similar rights held by employees
of other corporations who are about to become employees of the Company or an
Affiliated Company as a result of a merger or consolidation of the employing
corporation with the Company or an Affiliated Company, or the acquisition by the
Company or an Affiliated Company of the assets of the employing corporation, or
the acquisition by the Company or an Affiliated Company of stock of the
employing corporation as the result of which such other corporation becomes an
Affiliated Company.
16. Withholding Taxes.
Pursuant to applicable federal and state laws, the Company may be required
to collect withholding taxes upon the exercise of a CSO. The Company may
require, as a condition to the exercise of a CSO, that the Optionee concurrently
pay to the Company the entire amount or a portion of any taxes which the Company
is required to withhold by reason of such exercise, in such amount as the
Committee or the Company in its discretion may determine. In lieu of part or all
of any such payment, the Optionee may elect to have the Company withhold from
the shares to be issued upon exercise of the option that number of shares having
a Fair Market Value equal to the amount which the Company is required to
withhold.
7
<PAGE>
17. Other Definitions.
Whenever used in this Plan, except where the context might clearly indicate
otherwise, the following terms shall have the meanings set forth below:
a. "Act" means the U.S. Securities Act of 1933, as amended.
b. "Affiliated Company" means any Parent or Subsidiary of the Company.
c. "Award" or "grant" means any grant of a CSO (Option) made under this
Plan.
d. "Board of Directors" means the Board of Directors of the Company. The
term "Committee" is defined in Section 2 of this Plan.
e. "Common Stock" or "Common Shares" means the common stock, $.0001 par
value per share, of the Company, or in the event that the outstanding
Common Shares are hereafter changed into or exchanged for different
shares or securities of the Company or any other issuer, such other
shares or securities.
f. "Date of Grant" means the day the Committee authorizes the grant of a
CSO or such later date as may be specified by the Committee as the
date a particular grant will become effective.
g. "Employee" means and includes the following persons: (i) executive
officers, officers and directors (including advisory and other special
directors) of the Company or an Affiliated Company; (ii) full-time and
part-time employees of the Company or an Affiliated Company; (iii)
persons engaged by the Company or an Affiliated Company as a
consultant, advisor or agent; and (iv) a lawyer, law firm, accountant
or accounting firm, or other professional or professional firm engaged
by the Company or an Affiliated Company.
h. "Optionee" means an Employee to whom a CSO is granted.
i. "Parent" means any corporation owning 50% or more of the total
combined voting stock of all classes of the Company or of another
corporation qualifying as a Parent within this definition.
j. "Subsidiary" means a corporation more than 50% of whose total combined
capital stock of all classes is held by the Company or by another
corporation qualifying as a Subsidiary within this definition.
18. Litigation.
In the event that any Optionee or Optionee's successor should bring any
lawsuit or other action or proceeding ("Action") against the Company or an
Affiliated Company based upon or arising in relation to an Option, an Optionee,
or successor, as the case may be, not prevailing in such Action shall be
required to reimburse the Company or Affiliated Company's costs and expenses,
including reasonable attorneys' fees, incurred in defending such action and
appealing any award by a lower court.
8
<PAGE>
19. Miscellaneous Provisions.
The place of administration of this Plan shall be in the State of Colorado
(or subsequently, wherever the Company's principal executive offices are
located), and the validity, construction, interpretation and effect of this Plan
and of its rules, regulations and rights relating to it, shall be determined
solely in accordance with the laws of the State of Colorado or subsequent state
of domicile, should the Company be redomiciled. Without amending this Plan, the
Committee may issue Options and Options Shares to employees of the Company who
are foreign nationals or employed outside the United States, or both, on such
terms and conditions different from those specified in this Plan but consistent
with the purpose of this Plan, as it deems necessary and desirable to create
equitable opportunities given differences in tax laws in other countries. All
expenses of administering this Plan and issuing Option and Option Shares shall
be borne by the Company.
* * *
By signature below, the undersigned officers of the Company hereby certify
that the foregoing is a true and correct copy of the 1997 Compensatory Stock
Option Plan of the Company.
DATED: December 10, 1997
GALLAGHER RESEARCH AND
DEVELOPMENT COMPANY
(SEAL) By /s/ Alton V. Gallagher
------------------------------
Authorized Officer
By /s/ Rodney M. Gallagher
-----------------------------
Secretary
9
<PAGE>
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
CERTIFICATION OF PLAN ADOPTION
I, the undersigned Secretary of this Corporation, hereby certify that the
foregoing Compensatory Stock Option Plan of this corporation was duly approved
by the requisite number of holders of the issued and outstanding common stock of
this corporation as of the date below.
Date of Approval: December 10, 1997
X /s/ Rodney M. Gallagher
------------------------------
Signature
(SEAL)
10
Exhibit 10.2
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
1997 EMPLOYEE STOCK COMPENSATION PLAN
1. Purpose of the Plan.
This 1997 Employee Stock Compensation Plan ("Plan") is intended to further
the growth and advance the best interests of GALLAGHER RESEARCH AND DEVELOPMENT
COMPANY, a Colorado corporation (the "Company"), and Affiliated Corporations, by
supporting and increasing the Company's ability to attract, retain and
compensate persons of experience and ability and whose services are considered
valuable, to encourage the sense of proprietorship in such persons, and to
stimulate the active interest of such persons in the development and success of
the Company and Affiliate Corporations. This Plan provides for stock
compensation through the award of the Company's Common Stock.
2. Definitions.
Whenever used in this Plan, except where the context might clearly indicate
otherwise, the following terms shall have the meanings set forth in this
section:
a. "Act" means the U.S. Securities Act of 1933, as amended.
b. "Affiliated Corporation" means any Parent or Subsidiary of the
Company.
c. "Award" or "grant" means any grant or sale of Common Stock made under
this Plan.
d. "Board of Directors" means the Board of Directors of the Company. The
term "Committee" is defined in Section 4 of this Plan.
e. "Code" means the Internal Revenue Code of 1986, as amended.
f. "Common Stock" or "Common Shares" means the common stock, $.0001 par
value per share, of the Company, or in the event that the outstanding
Common Shares are hereafter changed into or exchanged for different
shares or securities of the Company, such other shares or securities.
g. "Date of Grant" means the day the Committee authorizes the grant of
Common Stock or such later date as may be specified by the Committee
as the date a particular award will become effective.
h. "Employee" means and includes the following persons: (i) executive
officers, officers and directors (including advisory and other special
directors) of the Company or an Affiliated Corporation; (ii) full-time
and part-time employees of the Company or an Affiliated Corporation;
(iii) natural persons engaged by the Company or an Affiliated
Corporation as a consultant, advisor or agent; and (iv) a lawyer, law
firm, accountant or accounting firm, or other professional or
professional firm engaged by the Company or an Affiliated Corporation.
i. "Parent" means any corporation owning 50% or more of the total
combined voting stock of all classes of the Company or of another
corporation qualifying as a Parent within this definition.
1
<PAGE>
j. "Participant" means an Employee to whom an Award of Plan Shares has
been made.
k. "Plan Shares" means shares of Common Stock from time to time subject
to this Plan.
l. "Subsidiary" means a corporation more than 50% of whose total combined
capital stock of all classes is held by the Company or by another
corporation qualifying as a Subsidiary within this definition.
3. Effective Date of the Plan.
The effective date of this Plan is December 10, 1997. No Plan Shares may be
issued after December 10, 2002.
4. Administration of the Plan.
The Compensation Committee of the Board of Directors ("Committee"), and in
default of the appointment or continued existence of such Committee, the Board
of Directors will be responsible for the administration of this Plan, and will
have sole power to award Common Shares under this Plan. Subject to the express
provisions of this Plan, the Committee shall have full authority and sole and
absolute discretion to interpret this Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other determinations which
it believes to be necessary or advisable in administering this Plan. The
determination of those eligible to receive an award of Plan Shares shall rest in
the sole discretion of the Committee, subject to the provisions of this Plan.
Awards of Plan Shares may be made as compensation for services rendered,
directly or in lieu of other compensation payable, as a bonus in recognition of
past service or performance or may be sold to an Employee as herein provided.
The Committee may correct any defect, supply any omission or reconcile any
inconsistency in this Plan in such manner and to such extent it shall deem
necessary to carry it into effect. Any decision made, or action taken, by the
Committee arising out of or in connection with the interpretation and
administration of this Plan shall be final and conclusive.
5. Stock Subject to the Plan.
The maximum number of Plan Shares which may be awarded under this Plan is
1,500,000 shares.
6. Persons Eligible to Receive Awards.
Awards may be granted only to Employees (as herein defined).
7. Grants or Awards of Plan Shares.
Except as otherwise provided herein, the Committee shall have complete
discretion to determine when and to which Employees Plan Shares are to be
granted, and the number of Plan Shares to be awarded to each Employee. A grant
to an Employee may be made for cash, property, services rendered or other form
of payment constituting lawful consideration under applicable law; Plan Shares
awarded other than for services rendered shall be sold at not less than the fair
value thereof on the date of grant. No grant will be made if, in the judgment of
the Committee, such a grant would constitute a public distribution with the
meaning of the Act or the rules and regulations promulgated thereunder.
2
<PAGE>
8. Delivery of Stock Certificates.
As promptly as practicable after authorizing an award of Plan Shares, the
Company shall deliver to the person who is the recipient of the award, a
certificate or certificates registered in that person's name, representing the
number of Plan Shares that were granted. Unless the Plan Shares have been
registered under the Act, each certificate evidencing Plan Shares shall bear a
legend to indicate that such shares represented by the certificate were issued
in a transaction which was not registered under the Act, and may only be sold or
transferred in a transaction that is registered under the Act or is exempt from
the registration requirements of the Act. In the absence of registration under
the Act, any person awarded Plan Shares may be required to execute and deliver
to the Company an investment letter, satisfactory in form and substance to the
Company, prior to issuance and delivery of the shares. An award may be made
under this Plan wherein the Plan Shares may be issued only after registration
under the Act.
9. Assignability.
An award of Plan Shares may not be assigned. Plan Shares themselves may be
assigned only after such shares have been awarded, issued and delivered, and
only in accordance with law and any transfer restrictions imposed at the time of
award.
10. Employment not Conferred.
Nothing in this Plan or in the award of Plan Shares shall confer upon any
Employee the right to continue in the employ of the Company or Affiliated
Corporation nor shall it interfere with or restrict in any way the lawful rights
of the Company or any Affiliated Corporation to discharge any Employee at any
time for any reason whatsoever, with or without cause.
11. Laws and Regulations.
The obligation of the Company to issue and deliver Plan Shares following an
award under this Plan shall be subject to the condition that the Company be
satisfied that the sale and delivery thereof will not violate the Act or any
other applicable laws, rules or regulations.
12. Withholding of Taxes.
If subject to withholding tax, the Company or any Affiliated Corporation
may require that the Employee concurrently pay to the Company the entire amount
or a portion of any taxes which the Company or Affiliated Corporation is
required to withhold by reason of granting Plan Shares, in such amount as the
Company or Affiliated Corporation in its discretion may determine. In lieu of
part or all of any such payment, the Employee may elect to have the Company or
Affiliated Corporation withhold from the Plan Shares issued hereunder a
sufficient number of shares to satisfy withholding obligations. If the Company
or Affiliated Corporation becomes required to pay withholding taxes to any
federal, state or other taxing authority as a result of the granting of Plan
Shares, and the Employee fails to provide the Company or Affiliated Corporation
with the funds with which to pay that withholding tax, the Company or Affiliated
Corporation may withhold up to 50% of each payment of salary or bonus to the
Employee (which will be in addition to any required or permitted withholding),
until the Company or Affiliated Corporation has been reimbursed for the entire
withholding tax it was required to pay in respect of the award of Plan Shares.
3
<PAGE>
13. Reservation of Shares.
The stock subject to this Plan shall, at all times, consist of authorized
but unissued Common Shares, or previously issued shares of Common Stock
reacquired or held by the Company or an Affiliated Corporation equal to the
maximum number of shares the Company may be required to issue as stated in
Section 5 of this Plan, and such number of Common Shares hereby is reserved for
such purpose.
14. Amendment and Termination of the Plan.
The Committee may suspend or terminate this Plan at any time or from time
to time, but no such action shall adversely affect the rights of a person
granted an Award under this Plan prior to that date. Otherwise, this Plan shall
terminate on the earlier of the terminal date stated in Section 3 of this Plan
or the date when all Plan Shares have been issued. The Committee shall have
absolute discretion to amend this Plan, subject only to those limitations
expressly set forth herein; however, the Committee shall have no authority to
extend the term of this Plan, to increase the number of Plan Shares subject to
award under this Plan or to amend the definition of "Employee" herein.
15. Delivery of Plan.
A copy or description (for which a prospectus registering the Plan Shares
will serve) of this Plan shall be delivered to every person to whom an award of
Plan Shares is made. The Secretary of the Company may, but is not required to,
also deliver a copy of the resolution or resolutions of the Committee
authorizing the award.
16. Liability.
No member of the Board of Directors, the Committee or any other committee
of directors, or officers, employees or agents of the Company or any Affiliated
Corporation shall be personally liable for any action, omission or determination
made in good faith in connection with this Plan.
17. Miscellaneous Provisions.
The place of administration of this Plan shall be in the State of Colorado
(or subsequently, wherever the Company's principal executive offices are
located), and the validity, construction, interpretation and effect of this Plan
and of its rules, regulations and rights relating to it, shall be determined
solely in accordance with the laws of the State of Colorado or subsequent state
of domicile, should the Company be redomiciled. Without amending this Plan, the
Committee may issue Plan Shares to employees of the Company who are foreign
nationals or employed outside the United States, or both, on such terms and
conditions different from those specified in this Plan but consistent with the
purpose of this Plan, as it deems necessary and desirable to create equitable
opportunities given differences in tax laws in other countries. All expenses of
administering this Plan and issuing Plan Shares shall be borne by the Company.
18. Reorganizations and Recapitalizations of the Company.
(a) The shares of Common Stock subject to this Plan are shares of the
Common Stock of the Company as currently constituted. If, and whenever, the
Company shall effect a subdivision or consolidation of shares or other capital
readjustment, the payment of a Common Stock dividend, a stock split, combination
of shares (reverse stock split) or recapitalization or other increase or
reduction of the number of shares of the Common Stock outstanding without
receiving compensation therefor in money, services or property, then the number
of shares of Common Stock subject to this Plan shall (i) in the event of an
increase in the number ofoutstanding shares, be proportionately increased; and
(ii) in the event of a reduction in the number of outstanding shares, be
proportionately reduced.
4
<PAGE>
(b) Except as expressly provided above, the Company's issuance of shares of
Common Stock of any class, or securities convertible into shares of Common Stock
of any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into or
exchangeable for shares of Common Stock or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number of
shares of Common Stock subject to this Plan.
* * *
By signature below, the undersigned officers of the Company hereby certify
that the foregoing is a true and correct copy of the 1997 Employee Stock
Compensation Plan of the Company.
DATED: December 10, 1997
GALLAGHER RESEARCH AND
DEVELOPMENT COMPANY
(SEAL) By /s/ Alton V. Gallagher
------------------------------
Authorized Officer
By /s/ Rodney M. Gallagher
-----------------------------
Secretary
5
<PAGE>
GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
CERTIFICATION OF PLAN ADOPTION
I, the undersigned Secretary of this Corporation, hereby certify that the
foregoing Employee Stock Compensation Plan of this corporation was duly approved
by the requisite number of holders of the issued and outstanding common stock of
this corporation as of the date below.
Date of Approval: December 10, 1997
X /s/ Rodney M. Gallagher
------------------------------
Signature
(SEAL)
6
Exhibit 10.3
ASSIGNMENT AND INDEMNITY AGREEMENT
DATED: June 8, 1998
Lakewood, Colorado
This Assignment and Indemnity Agreement is entered into effective the above
date between GALLAGHER RESEARCH AND DEVELOPMENT COMPANY, a Colorado corporation,
as assignor, whose principal executive offices are located at 1576 South Robb
Way, Lakewood, Colorado 80232 ("Assignor"), and GRDC, INC., a Colorado
corporation having the same address as Assignor ("GRDC").
1. Preamble. GRDC is the wholly owned subsidiary of Assignor, which owns
all of the 100 shares of common stock of GRDC issued and outstanding. Assignor
intends by this Agreement to assign and transfer its assets and liabilities, all
and sundry, to GRDC, a company formed by Assignor for the purpose of such
assignment and transfer. The officers and directors of Assignor and GRDC are the
same persons, holding the same offices in both companies.
2. Assignment of Assets. For valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor hereby assigns and
transfers all its right, title and interest whatsoever in and to the assets,
properties and things listed on EXHIBIT A to this Agreement, which is herein
incorporated by reference, and all other assets, properties and things of
Assignor (collectively, the "Assets"). It is the intention of the parties that
Assignor shall assign all of its Assets whatsoever to GRDC, whether or not
listed on EXHIBIT A, and the parties agree that any asset, property or thing
whatsoever not listed on EXHIBIT A, whether due to inadvertence or ignorance or
because acquired after the effective date of this Agreement, shall nonetheless
constitute part of the Assets and be deemed assigned to GRDC for no additional
consideration other than stated in this Agreement. In any such event(s),
Assignor agrees that it will at its expense, as promptly as is reasonably
possible, at GRDC's request execute all documents necessary to assign and
transfer to GRDC any and all such assets or things and to promptly deliver all
such assets, properties and things to GRDC.
3. Assumption of Liabilities. As partial consideration for Assignor's
assignment of the Assets, GRDC hereby assumes and agrees to pay and discharge in
full all of the trade payables and other liabilities listed on EXHIBIT B to this
Agreement, which is herein incorporated by reference, and all other liabilities
of Assignor now existing (collectively, the "Liabilities"). To further protect
Assignor against GRDC's failure to pay and discharge the Liabilities, GRDC has
granted Assignor the indemnification contained in this Agreement.
It is the intention of the parties that GRDC shall assume and agree to pay
and shall pay all of Assignor's trade payables and other Liabilities whatsoever,
whether or not listed on EXHIBIT B, and the parties agree that any Liability of
Assignor not listed on EXHIBIT B, whether due to inadvertence or ignorance or
because arising after the effective date of this Agreement, shall nonetheless
constitute part of the Liabilities and be deemed assumed by GRDC for no
additional consideration other than stated in this Agreement. In any such
event(s), GRDC agrees that it will at its expense, as promptly as is reasonably
possible, at Assignor's request execute a formal assumption and agreement to pay
any such Liabilities and thereafter to pay such Liabilities in full.
1
<PAGE>
4. Issuance of Stock to Assignor. As partial consideration for Assignor's
assignment and transfer of the Assets, GRDC shall issue and deliver to Assignor
Nine Thousand Nine Hundred (9,900) shares of the authorized and unissued common
stock, no par value, of GRDC (the "Control Shares"). The Control Shares shall
not be registered under the Securities Act of 1933, as amended ("Act"), and
shall bear a customary form of investment legend restricting transfer of the
Control Shares in the absence of registration under the Act or the availability
of an exemption from the Act's registration requirements.
5. Indemnification of Assignor. GRDC agrees, for no consideration other
than stated in this Agreement, to defend, indemnify and hold Assignor harmless
from and against any and all Liabilities herein assumed by GRDC but not paid or
otherwise discharged by GRDC, together with all damages, costs or expenses
(including reasonable attorney's fees, penalties and interest) incurred by
Assignor as a result of GRDC's failure to pay or discharge such Liabilities. For
purposes of this Agreement, the term "Liabilities" shall include any penalties,
attorneys' fees, court costs or other expenses, costs and damages incurred by
Assignor as a result of any person's collection or attempt to collect
Liabilities from Assignor.
(a) Assignor agrees to give GRDC prompt written notice of any claim
against Assignor for Liabilities which might give rise to a claim by Assignor
against GRDC based upon the foregoing indemnity, stating with particularity the
Liability and the actual or estimated amount thereof; provided, however, that
failure to give such notice will not affect the obligation of GRDC to indemnify
Assignor unless, and only to the extent that, GRDC is actually prejudiced by the
failure to give notice.
(b) In the event that any action, suit or proceeding is brought against
Assignor with respect to which GRDC may have liability under the indemnity, GRDC
shall have the right, at its sole cost and expense, to defend such action in the
name of or on behalf of the Indemnified Group and, in connection with any such
action, suit or proceeding, the parties hereto agree to render to each other
such assistance as may reasonably be required in order to ensure the proper and
adequate defense of any such action, suit or proceeding; provided, however, that
Assignor shall have the right to retain its own counsel, with the fees and
expenses to be paid by GRDC, if representation of Assignor by the counsel
retained by GRDC would be inappropriate because of actual or potential differing
interests between Assignor and any other party represented by such counsel.
Assignor shall not make any settlement of any claim which might give rise to
liability of GRDC under the indemnity without GRDC's prior written consent,
which consent GRDC covenants shall not be unreasonably withheld.
6. Expenses. Assignor shall bear all expenses related to this Agreement
arising or incurred prior to or through its effective date. GRDC shall bear all
expenses related to this Agreement which arise or are incurred after its
effective date, including but not limited to the cost of any legal advertisement
required by UCC laws.
7. Prevailing Party Clause. In the event of any litigation or proceeding
arising as a result of the breach of this Agreement or the failure to perform
hereunder, the party substantially prevailing in such litigation or proceeding
shall be entitled to collect the costs and expenses of bringing or defending
such litigation or proceeding, including reasonable attorneys' fees, from the
party not prevailing.
8. Miscellaneous Provisions. This Agreement shall be governed by and
construed under the laws of the State of Colorado and shall be interpreted as if
both parties participated equally in its drafting. Any notice or communication
hereunder must be in writing and given by depositing the same in the United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by telefax transmission
or by delivery by use of a messenger which regularly retains its delivery
receipts. Such notice shall be deemed received on the date on which it is
2
<PAGE>
delivered to the addressee. This Agreement is made, executed and delivered
effective as of the date above. This Agreement and the performance of all
obligations herein has been authorized by all requisite corporate action of both
parties.
GALLAGHER RESEARCH AND GRDC, INC.
DEVELOPMENT COMPANY
By /s/ Alton V. Gallagher By /s/ Alton V. Gallaher
--------------------------- ----------------------------
Alton V. Gallagher, Alton V. Gallagher,
Chief Executive Officer Chief Executive Officer
3
<PAGE>
ACKNOWLEDGMENT
STATE OF COLORADO )
) ss.
COUNTY OF LAKEWOOD )
I HEREBY CERTIFY that before me, a Notary Public duly commissioned and
qualified in and for the above jurisdiction, personally came and appeared Alton
V. Gallagher, known to me to be the Chief Executive Officer of GALLAGHER
RESEARCH AND DEVELOPMENT CO., a Colorado corporation, and of GRDC, INC., a
Colorado corporation, who after being duly sworn declared that he executed the
foregoing Assignment and Indemnity Agreement as his free act and deed and the
free act and deed of the parties represented therein by him, and that the
statements therein set forth are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand and seal on Sept.30, 1998.
/s/ Rae Jeanne Myers
- ----------------------------- Notary Commission Expires:
Notary Public
(SEAL)
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A TO ASSIGNMENT AND INDEMINITY AGREEMENT
DATED JUNE 8, 1998
ASSETS OF GALLAGHER RESEARCH AND DEVELOPMENT COMPANY
----------------------------------------------------
CASH - 1 ST BANK CHECKING $ 375.70
ACCOUNTS RECEIVABLE - TRADE $ 34,913.00
FIXED ASSETS CONSISTING OF THE FOLLOWING:
OFFICE FURNITURE AND EQUIPMENT
QTY ITEM
<S> <C> <C>
1 10 DESK (4 SECRETARIAL, 3 EXECUTIVE, 3 SINGLE DRAWER TABLES)
2 8 MATCHING SIDE CHAIRS
3 7 ADJUSTABLE DESK CHAIRS
4 4 4 DRAWER FILE CABINETS
6 4 2 DRAWER FILE CABINETS
7 2 K&E DRAFTING TABLES
8 5 BOOKCASES
9 7 COMPUTERS - IBM CLONES (1-386, 2-486, 2-PENTIUM 150, 1- PENTIUM 166, &
1 - PENTIUM 200)
10 1 LAPTOP COMPUTER - TEXAS INSTRUMENTS PENTIUM 90
11 2 HEWLETT PACKARD LASER PRINTERS (SERIES II & IID)
12 1 HEWLETT PACKARD DESK JET 1000C PRINTER
13 3 DICONIX PORTABLE INK JET PRINTERS
14 1 ENCAD CROMO27 PLOTTER
15 1 3' X 4' CALCOMP DIGITIZER
16 1 TOSHIBA 7720 COPIER
17 1 HEWLETT PACKARD 210 INK JET COLOR COPIER
18 1 UMAX SCANNER UC1260
19 6 AT&T PARTNER II TELEPHONES
20 - MISCELANEOUS OFFICE SUPPLIES (PAPER CUTTER, REPORT BINDER,
FAX, PENCIL SHARPENERS, DRAFTING SUPPLIES, CALCULATORS ETC.)
COMPUTER SOFTWARE
21 - 23 STATISTICA GOLDEN SOFTWARE GEOSOFT
24 - 26 MICROSOFT OFFICE ADOBE PREMIER PEACHTREE
27 VARIOUS PROPRIETARY IN-HOUSE PROGRAMS
LABORATORY EQUIPMENT
28 APPROX. 50' - VARIOUS LAB BENCHES
29 2 LAB-LINE ORBITAL SHAKERS
5
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30 2 ARRICK ROBOTIC ARM SYSTEMS / CUSTOM SOFTWARE
31 1 GEOCHEMICAL INSTRUMENTS - CD 1000 CO2 MONITOR
32 - VARIOUS PROBES, CHEMICALS, SAMPLE HEATERS, GAS VALVES, &
MISCELLANEOUS LAB SUPPLIES
INSTRUMENTS
33 2 HEWLETT PACKARD GAS CHROMATOGRAPHS (3790A & 5880 SERIES II)
34 2 ORION ION ANALYZER - EA 940
35 2 ORION CONDUCTIVITY METER 135
36 3 SODIUM IODIDE CRYSTALS (1 - 256 cu in and 2 - 512 cu in)
37 1 RADIOMETRIC COMPUTER SYSTEM
38 1 SPECTROMETER GR 410
39 3 MAGNETOMETERS
FIELD EQUIPMENT
40 3 GLOBAL POSITIONING SYSTEMS ( 1-GARMAN, 2- MAGELLAN PRO MARK X)
42 3 CUSTOM DRILL RIGS / 42" DEPTH
43 3 ATV"S (SUZUKI 4 WHEEL DRIVE)
44 1 PICKUP TRUCK TOPPER (GLASSTITE)
MISCELLANEOUS
TOPOGRAPHIC MAPS
PROSPECT MAPS
GEOLOGIC MAPS
ALL FILES, PAPERS, RECORDS AND SUPPLIES
ALL EQUIPMENT, TOOLS, AND OTHER THINGS
6
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EXHIBIT B TO ASSIGNMENT AND INDEMINITY AGREEMENT
DATED JUNE 8, 1998
LIABILITIES OF GALLAGHER RESEARCH & DEVELOPMENT COMPANY
-------------------------------------------------------
ACCOUNTS PAYABLE $ 2,753.00
ACCRUED EXPENSES $ 6,000.00
PAYROLL TAXES PAYABLE $ 1,440.00
7
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