<PAGE> COVER
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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
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NORTHBOROUGH HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
Colorado 05-0508624
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
17 West Cheyenne Mountain Blvd.
Colorado Springs, CO 80906 T2C 2W7
(Address of Principal
Executive Office) (Zip Code)
(401) 453-6870
(Issuer's Telephone Number, Including Area Code)
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Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
<PAGE> 1
FORWARD LOOKING STATEMENTS
THIS FORM 10-SB12G AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
NORTHBOROUGH HOLDINGS, INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH
MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FIFTEEN U.S.C.A.
SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF NORTHBOROUGH HOLDINGS,
INC. AND MEMBERS OF ITS MANAGEMENT TEAM AS WELL AS THE ASSUMPTIONS
ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE INVESTORS ARE CAUTIONED
THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.
IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS ARE SET FORTH
IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS
INCLUDED AS EXHIBIT 99.1 TO THIS FORM 10-SB12G, AND ARE HEREBY INCORPORATED
HEREIN BY REFERENCE.
THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING
STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED
EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME.
ITEM 1. DESCRIPTION OF BUSINESS
1. BUSINESS DEVELOPMENT
HISTORICAL
Northborough Holdings, Inc. ("Holdings") was incorporated as a private company
by certificate of incorporation under the laws of the State of Colorado on
November 24, 1999. Holdings principal office is located at 17 West Cheyenne
Mtn. Blvd., Colorado Springs, Colorado 80906 and has no paid employees at this
time.
Northborough Realty Holdings, LLC ("Realty") was organized as a limited
liability company under the laws of the State of Rhode Island on May 29, 1996,
and is a wholly owned subsidiary of Holdings. Realty's principal office is
located at 1250 Turks Head Building, Providence, RI 02903 and has no paid
employees at this time. Holdings and Realty are sometimes hereinafter
collectively referred to as the "Company".
<PAGE> 2
BUSINESS OF THE COMPANY
Background and Company Strategy
Holdings, a Colorado corporation, is a start-up company formed to engage
directly in financial services and to own all of the membership interests of
Realty. Realty focuses primarily on the acquisition, management and/or
liquidation of non-performing loan portfolios ("Asset Portfolios"), individual
non-performing and under-performing loans ("Assets") and distressed real
estate, securities and other properties for its own accounts and to manage
for third party investors. Realty began operations on May 29, 1996, and the
officers of Realty have extensive experience in Asset and Asset Portfolio acquis
ition and management business. Further details with regard to their
experience is set forth in the section below-entitled "Management." The
Company is engaged in an effort to raise capital and perform due diligence to
locate Asset Portfolios and Assets for its own acquisition or by joint venture
with well capitalized partners. The business of the Company involves acquiring
Asset Portfolios and Assets at a substantial discount to face value and
resolving them to obtain a maximum recovery. The Company will also be involved
in commercial mortgage banking and, to a lesser extent, commercial lending and
residential mortgage lending. The Company also will engage in the
acquisition, development, re-development, leasing and managing of commercial
real estate. The Company expects to become a major presence in the
Northeastern United States in these and related areas in the next two (2)
years and will expand operations to the South and Southwest over the next
three (3) years. The Company will focus its efforts on the following fronts:
1. Asset Management
Asset and Asset Portfolio acquisition and management will be
the primary area of focus by the Company. The Company seeks to acquire and
manage Assets and Asset Portfolios consisting of distressed loans secured by
real estate and other collateral. While the market for distressed loans has
been reduced in the last couple of years due to strengthening financial
institutions and real estate markets, there remains significant opportunities
to acquire such assets by purchasing smaller Asset Portfolios and single
Assets. Furthermore, by staying active in these areas and maintaining access
to significant cash reserves, the Company will be poised to take advantage of
buying opportunities during the next inevitable economic downturn.
2. Real Estate Investment
The Company intends to become a significant investor in commercial
real estate properties throughout New England, with expansion into New York
and the Mid-Atlantic Region, and ultimately into Southern and Southwestern
U.S. The primary acquisitions of real estate shall come about through the
Company's foreclosure on collateral securing loans it has purchased. However,
the Company will also purchase real estate through distressed sale scenarios,
such as foreclosures, receiverships, bankruptcy proceedings, and estate
sales. This approach to acquisition remains particularly important in a time
of rising real estate prices. It is the Company's belief that the recovery in
the real estate market is pushing prices to a point which might eclipse the
inherent value of the asset. As such, to avoid being a purchaser at the peak
of the market, the Company will seek to acquire properties from distressed
sellers at a discount to current market price. The Company looks for
properties that are fundamentally sound, but may be available at distress
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prices as a result of mismanagement, an excessive debt burden, or other
similar problems. The Company will target a wide range of commercial real
estate properties, including office buildings, retail, industrial and
multi-tenant residential properties. While the recovered/recovering real
estate markets have narrowed the dramatic discounts to market value which
distressed sales have produced over the past five (5) years, significant
opportunities remain for those investors who are able to identify assets in
those areas where demand for space continues to grow on a solid and
non-speculative basis.
3. Commercial Lending
The Company shall also engage in a limited amount of direct lending
to small businesses and commercial real estate borrowers. The Company can
perform a range of commercial mortgage banking services, such as origination,
underwriting, placement, selling and servicing. This is an area of great
growth potential given the large number of commercial real estate loans
outstanding throughout the Northeast and the nation, many of which are
refinanced each year. Initially, the Company intends to focus on bridge loans
to borrowers who have an immediate need for capital to acquire or improve real
estate or to make investments in their business interests in preparation for
sale or refinancing. Given the immediacy of the need for such funds, the
Company can command significant fees and points in addition to the above
market interest rates as permitted by law. Such loans can be held by the
Company or placed with third party investors. The Company will seek loans
where the borrower has substantial collateral (almost always real estate or
other fixed assets) with significant equity available in case of default.
Normally, the Company looks for loan-to-value ratios of at least 70% before
making such loans. Personal guaranties will also generally be required.
4. Longer Term Opportunities
(a) Small Business Investment Corporation. The Company may wish to
register itself or a wholly-owned subsidiary as a Small Business
Investment Company (an "SBIC") under the U.S. Small Business
Administration's (the "SBA") 7(a) Program. This would enable the
Company to make SBA guaranteed loans to small businesses for
start-up, acquisitions, and expansion. Controlling or operating
an SBIC would also enable the Company to make equity investments
and/or take warrants in the borrowers as further conditions to
the loans.
(b) Residential Mortgage Lender. The Company may also establish a
residential mortgage lending/brokerage arm or subsidiary to
engage in brokering and/or direct lending of residential loans
for acquisitions and/or equity loans to homeowners. This type
of business may best be developed by acquisition of an
established mortgage lender or broker.
<PAGE> 4
B. THE BUSINESS, MARKETS, OPERATIONS, AND DEVELOPMENT STRATEGY
1. Loan Portfolio Acquisition and Resolution
The Company and its principals believe that the deep drop in
the real estate market, as well as the overall economy in the late 1980's and
early 1990's has caused a significant and lasting change in the real estate,
banking and commercial lending industries. When real estate values were
imperiled in the late 1980's as a result of the Tax Reform Act of 1986 and
other factors, banks and other lending institutions were left with a large
amount of defaulted loan obligations secured by real estate mortgages. These
defaults, poor management and other economic factors caused many banking
institutions to fail. Those that did not fail still had to raise or maintain
sufficient capital to reserve against bad loans. One of the ways such loan
reserve requirements were dealt with was to sell off defaulted loan
portfolios. This was a relatively new process for most such lending
institutions and at first was often done in an inefficient manner. However,
over the past ten (10) years, these institutions have developed procedures and
policies in an attempt to make such sales a normal part of their business
practices. There has also emerged a market for companies to manage and resolve
Asset Portfolios for third parties. The substantial volume of
under-performing and non-performing loans and foreclosed assets combined with
the under-staffing of management by banks and insurance companies has
convinced many such institutions to hire third parties to manage and resolve
these Assets. The Resolution Trust Company (the "RTC") and the Federal
Deposit Insurance Company (the "FDIC") were also forced to contract out the
resolution of certain Asset Portfolios. Also, in the late 1980's and early
1990's many banks and savings and loans did fail and were taken over by the
FDIC and/or the RTC. These government agencies set about liquidating the loan
portfolios of these institutions in formal auctions and individual asset
sales. Such auctions continue today on a regular basis.
Given this recent history, it appears that a permanent market has emerged
in the areas of Asset Portfolio acquisition, management and resolution
services. Various institutions, including commercial banks, governmental
agencies, insurance companies and other financial institutions make such
assets available for acquisition at a discount from their face value. Through
negotiation and/or foreclosure these loans are either paid out or collected by
sale of the collateral and/or judicial process.
As with many business strategies timing is critical and there can be no
assurance that the Company can anticipate cyclical changes in those economics
impacting its success. It appears that inventory of defaulted loans has
diminished over the past ten (10) years due to the recovering/recovered real
estate market and overall economy. The banks, insurance companies and other
financial institutions which survived the tumult have generally emerged in a
stronger position. They currently have smaller portfolios of loans in default
(relative to assets) and have attempted to establish better staffed and more
experienced loan officers to handle the collection and sale of such Assets
Portfolios. Also, more participants have entered the market as buyers of such
<PAGE> 5
Assets and the availability of deeply discounted loans has diminished.
Nonetheless, the Company believes that the time is ripe to increase its
available funds for acquisition of individual loans and loan portfolios in
preparation of the inevitable dip in the economic cycle. It is our belief
that the combination of competition for market share by lending institutions
combined with increases in market price of the underlying collateral is
leading to a potential increase in the level of defaults should there be a
lull in the economic cycle. It appears that there is a "continuing erosion in
commercial loan quality despite the economy's overall vigor." Wall Street
Journal. Bank Stocks are Facing Added Pressure From Worry Over Loans,
Portfolio Losses, Sept. 14, 1999". Even in these times, which many consider
to be the best in recent history, the total of nonperforming loans at the 25
largest banks in the United States has increased 19% since the end of 1998 and
has surged 30% from June of 1999. Id. More recently Federal Reserve Chairman
Alan Greenspan has warned banks about bad loans stating the "[l]ending granted
on [the basis that the strong economy is `ordinary and expected'] could have
grave consequences for the [banking] industry's ability to weather weaker
economic conditions." Associates Press, March 8, 2000. He further stated
that, "[W]e have seen growing evidence of credit granted solely on the
expectation that the current robust conditions well continue indefinitely,
with little thought as to how borrowers might perform under more stressful
conditions". Id. The FDIC has also predicted that as many as twenty (20)
banks could fail this year. Id. This trend, combined with the increase in
bank consolidation and the fact that financial institutions have embraced the
idea of disposing of underperforming assets through outright third party sales
in order to improve the their balance sheet, make it likely that the available
inventory of Assets should increase in the near future.
By establishing and maintaining a presence in this market, the Company
believes it can still make significant returns during the current period while
maintaining sufficient liquidity to take advantage of market anomalies in
anticipation of a time where there are more dramatically discounted loan
portfolios. Even were such market adjustment not to develop for an extended
period, the Company's personnel are experienced and adept at locating and
purchasing assets at an initial price which allows for competitive current
returns and appreciation through value-added activities.
Most Assets and Assets within Asset Portfolios the Company will purchase
will be in payment default when acquired. Once purchased, the Company assumes
control of the management of the Asset or Asset Portfolio, which includes
servicing and resolution . Normally, the Company will not renew or refinance
the obligations, but will look to recovery through either (i) a discounted
payoff from the borrower (often accomplished by refinancing through a third
party lender), or (ii) foreclosure and sale of the collateral. However, in
some instances where the Asset has been acquired at a substantial discount and
the borrower agrees to continue to pay in accordance with the loan terms, the
Company will choose to hold the Asset due to its high current rate of return.
The Company believes that currently its greatest opportunity for return
is to purchase for its own accord Assets and Asset Portfolios. However , in
some instances the Company will perform due diligence and investigatory
services for third party investors. The Company can assist the third party in
<PAGE> 6
preparation of its bid for the Assets and in the acquisition. The Company can
either serve as a partner in the acquisition and own a portion of the Asset or
it can act as an outside contractor to manage and resolve the Asset for a
fee.
Many of the Assets and Asset Portfolios that are purchased by the Company
will be primarily tied to the real estate securing the loan. However, there
will also be some collateralized business loans, which will be resolved based
either on the cash flow of the business, real estate owned by the business
and/or other collateral securing the loan. The Company will obtain
information and learn of Asset Portfolios and individual Assets available for
sale from many different sources. The management of the Company have
established relationships with various financial institutions from which they
have purchased assets before and there will be repeat business and referrals
from those sellers. The individual reputations and relationships that
management has established with various Asset sellers will be further
solidified by the Company gaining reputation as an active portfolio purchaser
with sufficient resources and a steady commitment to the market. There are
also additional sources of business from joint venture partners or investors
who will seek the Company's assistance in Asset Portfolio purchases and
management, as well as other contacts developed and initiated by management of
the Company.
The Company will generally fund its purchase of the Assets and Asset
Portfolios with the combination of equity raised through private and public
offerings, debt or lines of credit which it will establish with lending
institutions, and internal cash flow. The amount of Assets or Asset
Portfolios purchased will greatly depend upon the availability of capital, the
availability of Assets and Asset Portfolios, and the success of offers made by
the Company to purchase those Assets and Asset Portfolios. The process the
Company will undergo in making an offer to purchase an Asset or an Asset
Portfolio is fairly well established. Generally, the Company's management
will conduct an extensive evaluation of the individual loan or loans which
make up the pool offered for sale. There may be certain instances where there
are unusually large number of Assets which are offered for sale, and as a
result the Company will perform extensive investigation with regard to an
adequate sampling in order to determine an appropriate bid price for the
pool. A typical examination of a credit file includes reviewing and analyzing
all information made available by the seller. It generally includes review of
the credit and collateral files, the legal documents, and all relevant
material that may be available (including in some instances correspondence,
taxes, judgment and other records) and an analysis of the underlying
collateral. The underlying collateral will be viewed by conducting site
inspections, appraisals or other valuations from experts with experience in
that market. The Company will also review and consider ongoing economic
information and meet with individuals familiar with local markets where the
real estate or other collateral is located. The Company has an advantage to
the original lender when it performs its review because it can base its
valuation on the present value of the estimated total cash flow from the
resolution of the Asset. Generally, these loans will be resolved prior to
their maturity, as it is the Company's intention not to refinance or renew the
purchased assets. The goal is to expedite the recovery.
<PAGE> 7
The review of Assets and Asset Portfolios will be conducted by management
and employees with substantial experience in the analysis of non-performing
and under-performing loans. Management has a broad range of experience
includes commercial lending with major financial institutions, legal
experience in commercial lending, collection, workout and bankruptcy, and
commercial real estate development and management. When determining what to
bid on an Asset, management will work together to form bids based upon the
value of each Asset, the underlying collateral, the likely cash flow and the
likely time and expense necessary to obtain sufficient recovery.
The competition the Company will meet in the Asset acquisition areas is
somewhat fragmented. There are national, local and regional competitors in
the Asset acquisition and Asset management markets. Many of these competitors
are larger and have far greater financial resources than the Company does.
The Company also anticipates based on its management's prior experience that
there will continue to be increasing competition and a market for Asset
Portfolios and individual Assets which may limit the near term profit margins
in the Asset acquisition business. However, the Company believes it can
remain a competitive bidder and the management's extensive experience,
commitment and relative conservative approach will enable the Company to
uncover opportunities that more recently arrived competitors in the market
will miss. Nonetheless, the Company believes it may in the near term have to
raise its bids for assets higher than it would have in the depths of the
recession in the early 1990's. The Company will also have to have access to
significant capital in order to be a competitive bidder for Asset Portfolios,
however, there can be no assurance that the Company will arrange for such
capital on terms acceptable to the Company.
Since the primary focus of the Company will be in the Asset acquisition
and management field, its entry into the commercial mortgage banking and
commercial lending and residential mortgage business will be initially
limited. Although these businesses are fragmented, there are certain major
national competitors as well as local and regional entities which command a
significant market share. If competitors have superior access to capital
sources, it will give them an advantage. Nonetheless, brokering both
commercial mortgage loans and residential mortgage loans are relatively low
cost operations which can add significant cash flow from brokerage fees.
2. Commercial Lending
In addition to acquiring loan portfolios, the Company will both
broker and make direct loans to commercial borrowers. The market to be
targeted by the Company will be borrowers seeking commercial loans, that have
been unsuccessful in obtaining loans from more traditional lenders. These
instances may range from borrowers who must obtain funding on very short
notice to those who are seeking lenders of last resort because of troubled
credit histories or immediate need for capital. The Company believes these
can still be good credit risks provided the Company obtains sufficient
collateral. Furthermore the lender is compensated for the immediate
availability of funds and the increased credit risk through significant fees
and interest rates. The Company has and will further develop a network of
commercial lenders which can act as participants or joint venture parties in
these loan transactions. The Company will be both a direct lender and a broker
of loans to third party investors and lending institutions. Also, the
emergence of a market for securitized commercial real estate mortgage pools
may also provide the Company with an available outlet for loans it makes. The
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level of the Company's involvement in the direct lending market will be
limited in the near term, but we believe that developing a market and presence
among the institutional buyers will provide an increase in the number of
commercial real estate loans the Company could make directly with its own
capital. Also, increased exposure to institutions engaged in the
securitization of loans might increase the Company's ability to obtain access
to the institutions managing those loans held in such securitized pools. Such
pools have defaulted loans which may provide Assets for the Company to acquire
at discount to face value. The Company will initially focus upon acting as a
commercial loan broker. The risk of loss is much greater when the Company's
own capital is not used to make the loan, even if the intent is to sell the
loan to a third party. There is an increasing number of bank and non-bank
lenders in the market place looking to make such commercial loans that rely on
third party brokers for leads.
3. SBA Lending
A longer term goal of the Company would be to establish itself as a
non-bank lender to better qualified borrowers using government guaranty
programs through the SBA. The Company could establish and fund a wholly owned
subsidiary to provide capital to small businesses and entrepreneurs through
the use of SBA guaranteed loans. The Company's subsidiary could qualify as a
SBIC under the SBA's guidelines and make loans for financing commercial real
estate, machinery and equipment or a business acquisition. This program
allows the Company to participate in a growing and profitable lending area
while limiting the risk of loss by use of SBA loan guarantees. We believe the
market for small commercial real estate loans is under served by larger
lending institutions which often have large minimum loan sizes and limited
terms.
4. Residential Mortgage Lending.
The market for residential mortgage lending is massive and continues
to grow as more and more Americans become able to purchase their own homes.
While there are many residential mortgage lenders and the industry is
undergoing some change as a result of the internet, we believe that a well
positioned and efficient company can still do well and be very profitable.
The Company's involvement in this market is more of a long term goal and may
actually come about by the acquisition of an existing mortgage lender. In the
alternative, the barrier to entry in the business is becoming less difficult
and starting such a residential mortgage brokerage is viable. Management has
significant experience in banking and has strong contacts with experienced
individuals in the residential mortgage broker areas. In the event the
Company cannot acquire a mortgage broker company at a good valuation, it may
be in the Company's interest to attract talented and experienced residential
mortgage brokers and related administrative staff to establish a residential
mortgage broker division or subsidiary by making the overall assets and
infrastructure of the Company available as a platform to launch the retail
residential mortgage business. The emergence of the internet in this area
also adds a new dynamic and the Company believes that any operation that it
establishes or acquires should attempt to position itself to involve an
e-commerce aspect to its growth.
<PAGE> 9
LOANS
The Company intends to utilize bank loans, trade and other commercial credit
on a limited basis, if available. Working capital and lines of credit,
secured by the Assets acquired by the Company and accounts receivable, may be
used during the routine course of its business. These may be warehouse
facilities provided by a commercial lender(s) for the purposes of the Company
re-lending the funds on a short-term basis. Those loans may then be resold or
securitized and the proceeds used to pay back the warehouse facility and
provide opportunity capital to the Company. To the extent such loans can be
used to acquire Assets and Asset Portfolios, the Company will use the loan
proceeds to leverage rates of return on those Assets. There can be no
assurance that such loans, trade or commercial credit can be arranged on terms
acceptable to the Company.
MERGERS AND ACQUISITIONS
It is impossible to predict the manner in which the Company may participate in
a business opportunity. Specific business opportunities will be reviewed in
light of the respective needs and desires of the Company of the opportunity
and, upon the basis of that review and the relative
negotiating strength of the Company, the legal structure or method deemed by
management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint
ventures and other contractual arrangements. The Company may act directly or
indirectly through an interest in a partnership, corporation or other form of
organization. It is likely that the Company will attempt to acquire similar
or like businesses and participate in business opportunity through the
issuance of Common Stock or other securities of the Company.
RISK FACTORS
Investors should carefully consider the following matters in connection
with an investment in the securities to be offered by the Company in addition
to the other information contained or incorporated by reference herein.
Information contained or incorporated by reference in this Prospectus may
contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, which can be identified by the use
of forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon
or comparable terminology. The following matters and certain other factors
noted throughout this Prospectus as well as any exhibits and attachments to
this Prospectus, constitute cautionary statements identifying important
factors with respect to any such forward-looking statements, including certain
risks and uncertainties that could cause actual results to differ materially
from those reflected in such forward-looking statements.
A. Potential Fluctuations in Quarterly Operating Results
There can be no assurance that the Company will be able to generate
revenue or maintain quarterly profitability in the future. The
Company's quarterly and annual results may vary significantly in the
future due to a number of factors, including: changes in revenue
<PAGE> 10
returns on Assets; variations in timing of announcement and
introduction of new products or services by the Company and its
competitors; market acceptance of the Company's and its customer's
products; gain or loss of significant customers; and competitive
factors. Any unfavorable changes in such factors or others could
have a material adverse effect on the Company's operating results.
B. Limited Operating History
The Company's business is at an early state of its development and
has a limited operating history. The likelihood of the success of
the Company must be considered in light of the risks inherent in, and
the difficulties, costs, complications and delay encountered in, the
acquisition and liquidation of Assets and Asset Portfolios,
availability of capital and development and marketing of new
services. The Company's plans are based upon anticipated significant
growth of the business. The success of the Company will be
contingent upon its ability to implement and manage this expansion.
C. Uncertain Nature of the Asset Acquisition and Resolution Business
The outsourcing of the management and resolution of Asset Portfolios
has grown rapidly since the late 1980s; accordingly, the Asset
Portfolio acquisition and resolution business is relatively young and
still evolving. This business is affected by long-term cycles in the
general economy. In addition, the volume of domestic Asset
Portfolios available for purchase by investors or management by
third party servicers such as the Company has generally declined since
1993. The Company cannot predict what will be a normal annual volume
of Asset Portfolios to be sold or outsourced for management and
resolution. Moreover, there cannot be any assurance that Asset
Portfolio purchasers/owners for whom the Company provides Asset
Portfolio management services will not build their own management
and resolution staffs and reduce or eliminate their outsourcing
of these services. In addition, increased competition for Asset
Portfolios will continue to impact the Company's ability to invest
in Asset Portfolios and to obtain management and resolution contracts
from third party buyers. As a result of these factors, it is
difficult to predict the long-term future of this business.
D. Diversification in Business Lines and Management of Growth
The Company will substantially rely on its investments in Asset
Portfolios. The Company also pursues private sector Asset Portfolio
management contracts, generally through co-investing in Asset
Portfolios. The Company will attempt to diversify by entering into
the commercial mortgage banking or brokerage, residential mortgage
brokerage business through a combination of acquisitions and the
internal start-up of new business lines.
<PAGE> 11
As a result, the Company must simultaneously manage (i) a significant
change in its customer mix, (ii) the investment of the Company's own
capital in Asset Portfolios and its commercial mortgage banking and
residential mortgage business lines and (iii) the development of
other new business lines in which the Company has not previously
participated. All of these activities will require the investment
of additional capital and the significant involvement of senior
management to achieve a successful outcome. There is no assurance
that the Company will successfully execute this strategic transition.
The entry of the Company into new business lines will be slow, but
will result in increased demands on the Company's personnel and
systems. The Company must successfully continue its assimilation of
multiple acquired businesses with differing cultures, systems and
managements. The Company's ability to support, manage and control
continued growth is dependent upon, among other things its ability to
hire, train, supervise and manage its workforce and to continue to
develop the skills necessary for the Company to compete successfully
in its new business lines. There can be no assurance that the
Company will successfully meet all of these challenges.
E. General Economic Conditions
Periods of economic slowdown or recession, rising interest rates or
declining demand for real estate may adversely affect certain segments
of the Company's business. Although such economic conditions may
increase the number of non-performing loans available for sale to or
for management by the Company, such conditions could adversely affect
the resolution of Asset Portfolios held by the Company for its own
account or managed for others, lead to a decline in prices or demand
for collateral underlying Asset Portfolios or, in the case of Asset
Portfolios held for the Company's own account, increase the cost of
capital invested by the Company and the length of time that capital
is invested in a particular Asset Portfolio, thereby negatively
impacting the rate of return realized from such Asset Portfolio.
Economic downturns and rising interest rates also may reduce the
number of loan originations by the Company's commercial mortgage
banking business and negatively impact its residential mortgage
business and potential securitization activity.
F. Need for Additional Financing
The Company's ability to execute its business strategy depends to a
limited degree on its ability to obtain additional indebtedness and
equity capital. Other than as described herein, the Company has no
commitments for additional borrowings or sales of equity capital and
there can be no assurance that the Company will be successful in
consummating any such future financing transactions or terms
satisfactory to the Company, if at all. Factors which could affect
the Company's access to the capital markets, or the costs of such
capital, include changes in interest rates, general economic
<PAGE> 12
conditions and the perception in the capital markets of the Company's
business, results of operations, leverage, financial condition and
business prospects. Each of these factors is to a large extent
subject to economic, financial, competitive and other factors beyond
the Company's control. In addition, covenants under the Company's
current and future debt securities and credit facilities may
significantly restrict the Company's ability to incur additional
indebtedness and to issue Preferred Stock. The Company's ability to
repay any outstanding indebtedness, at maturity may depend on its
ability to refinance such indebtedness, which could be adversely
affected if the Company does not have access to the capital markets
for the sale of additional debt or equity securities through public
offerings or private placements on terms reasonably satisfactory to
the Company.
The Company's expansion of Asset and Asset Portfolio acquisitions
and possible entry into commercial and residential mortgage
securitization businesses depend upon its ability to obtain warehouse
facilities with financial institutions or institutional lenders to
finance the Company's purchase of loans on a short-term basis pending
sale or securitization. Implementation of the Company's growth
strategy may require continued availability of warehouse facilities
and may require increases in the capacity of warehouse facilities.
There can be no assurance that such financing will be available on
terms reasonably satisfactory to the Company. The inability of the
Company to arrange additional warehouse facilities or to extend or
replace existing facilities when they expire would have a material
adverse effect on the Company's business, financial condition and
results of operations and on the Company's outstanding securities.
G. Asset Performance Assumptions
The Company's business, financial condition, results of operations
and liquidity depend, to a material extent, on the performance of
loans owned directly or backing securities purchased and sold by the
Company. The carrying value of the Company's principal assets will
be determined in part using estimates of future cash flows based on
assumptions concerning future default and prepayment rates that are
consistent with the Company's historical experience and market
conditions and present value discount rates that the Company
believes would be requested by an unrelated purchaser of an identical
stream of estimated cash flows. Management believes that the Company's
estimates of cash flows are reasonable at the time such estimates
are made. However, the actual rates of default and/or prepayment on
such assets may exceed those estimated and consequently may adversely
affect anticipated future cash flows and results of operations. The
Company will periodically review its prepayment and loss assumptions
in relation to current performance of the loans and market conditions
and, if necessary, provides for the impairment of the respective
<PAGE> 13
asset. The Company's business, financial condition and results of
operations could be materially adversely affected by such adjustments
in the future. No assurance can be given that loan losses and
prepayments will not exceed the Company's estimates or that such assets
could be sold at their stated value on the balance sheet, it at all.
H. Retained Risks of Loans Sold or Securitized
In connection with the Company's sale of certain loans or securities,
the Company may retain certain risks of loss associated with unrated
or higher default risk loans or assets. In addition, the Company
must also make certain representations and warranties concerning
loans originated by the Company and sold. These representations
cover such matters as title to the property, lien priority,
environmental reviews and certain other matters. In connection with
its potential residential capital markets business, the Company also
will have to make various representations with respect to the loans
that it pools and securitizes. The Company's representations rely in
part on similar representations made by the originators of such loans
to the Company. The Company would have a claim against the
originator in the event of a breach of any of these representations
made by the originators, however, the Company's ability to recover on
any such claim is dependent on the financial condition of the
originator. There can be no assurance that the Company will not
experience a material loss in respect of any of these contingencies.
I. Residential Mortgage Market Conditions
Periods of economic slowdown or recession, whether general, regional or
industry-related, may increase the risk of default on residential
mortgage loans and may have an adverse effect on the Company's
business, financial condition and results of operations. Such
periods also may be accompanied by decreased consumer demand for
residential mortgages, resulting in declining values of homes
securing outstanding loans, thereby weakening collateral coverage
and increasing the possibility of losses in the event of default.
Significant increase in homes for sale during recessionary economic
periods may depress the prices at which foreclosed homes may be sold
or delay the timing of such sales. There can be no assurance that
the housing markets will be adequate for the sale of foreclosed homes
and any material deterioration of such markets could reduce
recoveries from the sale of repossession inventory.
<PAGE> 14
J. Interest Rates
Since certain of the Company's borrowings, may be at variable rates of
interest, the Company may be impacted by increases in interest rates.
In addition, the value of its interest-earning assets and liabilities
may be directly affected by the level of and fluctuations in interest
rates. The Company monitors the interest rate environment and
employs prefunding or other hedging strategies designed to mitigate
the impact of changes in interest rates. However, there can be no
assurance that the profitability of the Company would not be
adversely affected during any period of changes in interest rates.
A significant decline in interest rates could result in increased
prepayment of outstanding loans.
K. Competition
The Asset Portfolio management and resolution and other financial
services industries in which the Company operates are highly
competitive. Some of the Company's principal competitors in certain
business lines are substantially larger and better capitalized than
the Company. Because of these resources, these companies may be
better able than the Company to obtain new customers, to acquire
Asset Portfolios, to pursue new business opportunities or to survive
periods of industry consolidation.
The Company believes that its ability to acquire Asset Portfolios for
its own account will be important to its future growth. Acquisitions
of Asset Portfolios are often based on competitive bidding, where
there are dangers of bidding too low (which generates no business),
as well as of bidding too high (which could win the Asset Portfolio
at an economically unattractive price). In addition, the increasing
competition in this business line could cause the Company to
experience decreasing profit margins in its Asset Portfolio business
in order to remain a competitive bidder for Asset Portfolios.
The Company will also encounters significant competition in its other
business lines. The commercial mortgage banking business is highly
fragmented with certain large national competitors and significant
localized competition. In addition, within the commercial loan
origination and residential mortgage securitization business, access
to and the cost of capital are critical to the Company's ability to
compete. The Company must compete with numerous competitors, many of
whom have superior access to capital sources and can arrange or
obtain lower cost capital for customers.
L. Dividends
Holdings has never paid a dividend on its Common Shares and there is
no assurance that Holdings will be in a financial position to pay
such dividends in the near future or at all.
<PAGE> 15
M. Dependence on Key Personnel
The Company's success depends to a significant extent upon a number of
key employees. The Company has not entered into agreements with key
employees. The Company currently does not have key man insurance on
these employees. The loss of the services of one or more of these
key employees could have an adverse effect on the Company. The
success of the Company will depend upon the ability of key members
of its management to perform its business plan.
The Company's future success depends in large on part of the continued
service of its key management personnel and on its ability to
continue to attract and retain qualified employees. The competition
for such personnel is intense, and the loss of key employees could
have a material effect on the Company's financial condition and
results of operations.
N. Future Acquisitions
The Company may seek to expand its business through the acquisition of
compatible products or businesses. There can be no assurance that
suitable acquisition candidates can be identified and acquired on
terms favorable to the Company or that the acquired operations can
be profitably operated or integrated into the Company.
O. Issuance of Preferred Stock may adversely Affect Holders of
Common Stock or Delay or Prevent Corporate Take-Over
The Company's Articles of Incorporation provide that preferred stock
may be issued by the Company from time to time in one or more series.
The Board of Directors of the Company is authorized to determine the
rights, preferences, privileges and restrictions granted to and
imposed upon any wholly unissued series of preferred stock and the
designation of any such shares, without any vote or action by the
Company's shareholders. The Board of Directors may authorize and
issue Preferred stock with voting power or other rights that could
adversely affect the voting power or other rights of the holders of
Common Stock. In addition, the issuance of preferred stock could
have the effect of delaying, deferring or preventing a change in
control of the Company, because the terms of preferred stock that
might be issued could potentially prohibit the Company's consummation
of any merger, reorganization, sale of substantially all of its
assets, liquidation or other extraordinary corporate transaction
without the approval of the holders of the outstanding shares of the
preferred stock.
<PAGE> 16
P. No Prior Trading Market; Potential Volatility of Stock Price
There has been no public market for the Common Stock, and there can
be no assurance that an active trading market will develop or be
sustained. At a future date, provided a public market for the stock
does develop, the market price of the shares of Common Stock is
likely to be highly volatile and may be significantly affected by
factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new products and/or
services by the Company or its competitors, governmental regulatory
action, developments with respect to patents or proprietary rights and
general market conditions. In addition, the stock market has from
time-to-time experienced significant price and volume fluctuations
that are unrelated to the operating performance of particular
companies.
Q. Indemnification of Officers and Directors
The Company's Bylaws provide for the indemnification of its directors,
officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation
to which they become a party arising from their association with or
activities on behalf of the Company. The Company will also bear the
expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company
therefor if it is ultimately determined that any such person shall
not have been entitled to indemnification. This indemnification
policy could result in substantial expenditures by the Company which
it will be unable to recoup.
R. Dependence upon Outside Advisors
To supplement the business experience of its officers and directors,
the Company may be required to employ consultants or advisors. It is
anticipated that such persons may be engaged on an "as needed" basis
without a continuing fiduciary or other obligation to the Company.
S. Rule 144 Sales
Some of the outstanding shares of Common Stock held by present
stockholders are "restricted securities" within the meaning of Rule
144 under the Securities Act of 1933, as amended. As restricted
shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or
other applicable exemptions from registration under the Act and as
required under applicable state securities laws. Rule 144 provides
in essence that a person who has held restricted securities for a
prescribed period may, under certain conditions, sell every three
months, in brokerage transactions, a number of shares that does not
exceed the greater of 1.0% of a company's outstanding common stock or
the average weekly trading volume during the four calendar weeks
<PAGE> 17
prior to the sale. As a result of revisions to Rule 144 which
became effective on or about April 29, 1997, there will be no limit
on the amount of restricted securities that may be sold by a
nonaffiliate after the restricted securities have been held by the
owner for a period of two years. A sale under Rule 144 or under any
other exemption from the Act, if available, or pursuant to subsequent
registrations of shares of Common Stock of present stockholders, may
have a depressive effect upon the price of the Common Stock in any
market that may develop.
T. Year 2000 Uncertainties
Recently, national attention has focused on the potential problems
and costs resulting from computer programs being written using two
digits rather than four to define the applicable year. Any computer
programs that have date-sensitive software may recognize a date using
"00" as the year 2000 complaint, there can be no assurance until the
year 2000 that all systems will function adequately then. If they do
not, the result could be a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in
similar normal business activities.
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A. PLAN OF OPERATION
1. PLAN OF OPERATION FOR THE NEXT 12 MONTHS
The plan of operation for the next twelve months is to engage
in those activities described in Item 1 under the BUSINESS OF COMPANY section.
The corporate policy regarding these activities will be formed through a
generation of ideas and direction from a Board of Directors. The day-to-day
operations and decisions will be delegated to a senior management team
directed by a chief executive officer with counsel and implementation from
experienced officers. The four primary officers of the Company who will be
responsible for the day-to-day implementation of the corporate policy and
direction will be James R. Simmons, Scott B. Adams, Richard Nadeau, Jr. and
Kevin Gillis. All four were founding members of Realty. Realty has been in
the business of acquiring defaulted loan obligations from financial
institutions and collecting said obligations through negotiation or
foreclosure on the collateral securing the loan. Its emphasis has been on
purchasing individual assets from New England banks. These assets are
generally smaller loans ($150,000 to $300,000) which are ripe for immediate
restructure or conversion to foreclosure or refinance. The Company's success
will largely be driven by the proven experience of its management who have
already demonstrated the viability of the Company's business plan through the
experiences of Realty. The collective practical experience of this group in
the areas of business the Company will engage in is important in the
operations of the Company. Each brings a specific set of skills and knowledge
that include commercial banking, loan workout, real estate, environmental
liability and law. These individuals have already developed the necessary
contacts and demonstrated their abilities with major financial institutions
such that they are now called on a regular basis to acquire individual or bulk
sale assets. The principals are critical as there is truly a "barrier of
entry" into the Asset acquisition business which has already been bridged by
this group. Further, management has developed a system of performing due
diligence on these assets and a proven formula for successful bidding.
Realty has earned over $1.4 million net profit on an original capital
investment of $300,000 in its three and one-half (3.5) years of operation,
having experienced average rates of return on equity of over fifty percent
(50%). Realty has also identified and acquired medium and long-term
"performing"assets at significant discounts which provide ongoing cash flow.
These asset are typically loans which had historic payment defaults, but which
Realty has resurrected by restructuring the payment provisions or convincing
the borrower to reinstate to avoid lose of the collateral.
<PAGE> 19
2. NEED FOR ADDITIONAL FINANCING
No commitments to provide additional funds have been made
by management or other stockholders. Accordingly, there can be no assurance
that any additional funds will be available to the Company to allow it to cover
its expenses. However, given its current operations and extended business
plan, the Company has sufficient cash flow and line of credit availability to
continue to execute the business plan of the Company. However, the proposed
rate of growth and financial projections assume raising $3,000,000 through the
issuance and sale of convertible preferred equity in the Company. If such
capital is not raised through such an offering, the Company's growth
proportions may not be met. Nonetheless, Realty would still have sufficient
cash flow and debit availability to continue along its historical operational
history.
3. NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" ("SFAS 121") issued by the FASB, is effective for financial statements for
fiscal years beginning after December 15, 1995. The standard establishes new
guidelines regarding when impairment losses on long-lived assets, which
include plant and equipment, certain identifiable intangible assets, and
goodwill, should be recognized and how impairment losses should be measured.
The Company does not expect adoption to have a material effect on
its financial position or results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") issued by the FASB, is effective for
specific transactions entered into after December 15, 1995. The disclosure
requirements of SFAS 123 are effective for financial statements for fiscal
years beginning no later than December 15, 1995. The new standard established
a fair value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non-employees
in exchange for equity instruments. The Company does not expect adoption to
have a material effect on its financial position or results of operations.
CAUTIONARY STATEMENT
This Registration Statement on Form 10SB contains statements relating to
future results of the Company (including certain projections and business
trends) that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those projected as a result of certain risks and uncertainties, including
but not limited to changes in political and economic conditions; domestic and
foreign government spending, budgetary and trade policies; Asset performance,
successful development of new business lines, and competition as well as other
risks and uncertainties, including but not limited to those described above in
the discussion under RISK FACTORS, and those detailed from time to time in the
filings of the Company with the Securities and Exchange Commission.
<PAGE> 20
ITEM 3 DESCRIPTION OF PROPERTY
A. The Company's registered and records office is at 17 West
Cheyenne Mtn. Blvd., Colorado Springs, Colorado 80906. Realty's principal
office is at 1250 Turks Head Building, Providence, RI 02903.
The Company has no full time employees. Until additional capital is
raised, the officers of the Company serve as unpaid employees in that all of
the officers are shareholders in the Company. Holdings and/or Realty, may
from time to time pay to the officers of the Company a salary or fee for
services rendered in handling the activities of Holdings and/or Realty
pursuant to the instructions of the Board of Directors. Such payments may be
as a result of a successful liquidation of an Asset or for some other
performance on behalf of the Company.
The Company does not own any real estate used in its operations
except for investment purposes. The Company leases its offices, with Realty
leasing space in 1250 Turks Head Building, Providence, Rhode Island and
Holdings leasing space at _______________. The leases currently require no
cash payment, but if capital is raised as assumed in the Company's projections
set forth ITEM 2.B. hereof, then the Company will require additional office
space and will begin to pay rent as estimated in said Projections.
B. INVESTMENT IN REAL ESTATE AND REAL ESTATE MORTGAGES
The Company will seek to acquire nonperforming or underperforming
loans secured by real estate and other collateral at a discount to face
value. Similarly, the Company will seek to acquire real estate from
distressed sellers at a discount to current market price. The Company looks
for properties that are fundamentally sound, but may be available at distress
prices as a result of mismanagement, an excessive debt burden, or other
similar problems. The Company will target a wide range of commercial real
estate properties, including office buildings, retail, industrial and
multi-tenant residential properties.
<PAGE> 21
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth as of March 14, 2000, information with respect
to the beneficial ownership of the Company's outstanding Common Stock by (i)
each director and executive officer of the Company, (ii) all directors and
executive officers of the Company as a group, and (iii) each shareholder who
was known by the Company to be the beneficial owner of more than 5% of the
Company's outstanding Common Stock. Pursuant to the beneficial ownership
rules under the Securities Exchange Act of 1934, as amended, each 5% named
person and all directors and executive officers as a group are deemed to be
the beneficial owners of securities that may be acquired within 60 days of
March 14, 2000 through the exercise of options or warrants. Accordingly,
the number of shares and percentages set forth opposite each shareholder's
name in the table below assumes the exercise of all such options and
warrants. However, the number of shares of Common Stock issuable upon
exercise by any given shareholder are not included in calculating the
percentage of Common Stock beneficially owned by any other shareholder.
Except as otherwise indicated, the persons or entities listed below have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them.
As of March 14, 1999 the directors and officers of the Company as a group,
owned beneficially, directly or indirectly, or exercised control or direction
over an aggregate of 1,200,000 Common Shares or approximately 100% of the
issued and outstanding Common Shares. See "Directors and Officers".
Number of Shares Percentage
Name and Address(1) Beneficially Owned of Class Owned
James R. Simmons 300,000 25%
105 Riverview Ave.
Middletown, RI 02842
Richard Nadeau, Jr. 300,000 25%
29 Homestead Ave.
North Smithfield, RI 02896
Scott B. Adams 300,000 25%
45 Annawamscutt Road
Barrington, RI 02806
<PAGE> 22
Number of Shares Percentage
Name and Address(1) Beneficially Owned of Class Owned
Kevin P. Gillis 300,000 25%
16 Foxmeadow Lane
Arlington, MA 02174
(1) The persons listed are the sole officers and directors of the Company.
Management has no plans to issue any additional securities to management,
promoters or their affiliates or associates and will do so only if such
issuance is in the best interests of shareholders of the Company and complies
with all applicable federal and state securities rules and regulations.
Although the Company has a very large amount of authorized but unissued common
and preferred stock that may be issued without further shareholder approval or
notice, it is the intention of the Company to avoid inhibiting certain
transactions by not having to proxy shareholders each time management needs to
authorize additional shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
EXECUTIVE OFFICERS AND BOARD OF DIRECTORS
The members of the Board of Directors provide expertise in research and
development, capital acquisition, promotion, mergers and acquisitions, and
corporate law. Their technical acumen, along with their wish to see the
Company successful has made their presence on the Board a resource to the
management team.
The following table and biographical data sets forth certain information
regarding the both the directors and the executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- ----------------------------------------------------
<S> <C> <C>
James R. Simmons 37 President, CEO, Director
<PAGE> 23
Richard Nadeau, Jr. 41 Vice President, Director,
Secretary
Scott B. Adams 37 Vice President, Director,
Treasurer
Kevin A. Gillis 42 Director
</TABLE>
All current directors hold office until the 2001 annual meeting of the
Company's shareholders and until their successors are duly elected and
qualified; thereafter, directors will be elected annually. The executive
officers are appointed annually by the Board of Directors and serve at the
discretion of the Board. No family relationships exist among any of the
directors and executive officers of the Company.
Officers will hold their positions at the pleasure of the board of directors,
absent any employment agreement, of which none currently exists or is
contemplated. There is no arrangement or understanding between the directors
and officers of the Company and any other person pursuant to which any
director or officer was or is to be selected as a director or officer.
The directors and officers of the Company will devote their time to the
Company's affairs on an "as needed" basis. As a result, the actual amount of
time which they will devote to the Company's affairs is unknown and is likely
to vary substantially from month to month.
MANAGEMENT
The Company will have as directors, officers and employees very high
quality individuals with extensive experience in the areas of banking,
commercial lending, work-out, real estate, and law. The structure of the
Company shall include a Board of Directors, which will be drawn from leaders
in the financial services, banking, real estate and legal industries.
The following is a more detailed description of the officers' experience:
1. James R. Simmons - Mr. Simmons is an attorney with extensive
experience in the areas of commercial lending, banking, loan work-out,
foreclosure, and creditor's rights. Mr. Simmons is a shareholder of
the law firm Nadeau & Simmons, P.C., a Rhode Island professional
corporation, with an extensive practice in banking, commercial law,
corporate finance, securities, commercial real estate and
development, and related commercial litigation. As a member of
Northborough Realty Holdings, LLC, Mr. Simmons has been integral in
<PAGE> 24
the location, acquisition and work-out of various assets held by
that company. Mr. Simmons brings a wealth of knowledge relating to
distressed real estate, commercial lending, foreclosure and
creditor's rights along with a thorough and practical understanding
of the financial aspects of such transactions. Mr. Simmons is a
graduate of the University of Hartford and the George Washington
University School of Law sits on the Banks and Trusts Committee of
the Rhode Island Bar Association and has acted as legal counsel to
some of the largest financial institutions in the nation.
2. Scott B. Adams - Mr. Adams' professional background has principally
been as a commercial banker where he had spent over ten years
underwriting and managing large corporate banking relationships.
As a vice-president of a major regional bank, his responsibilities
included negotiating some of the largest and most difficult loan
workouts. These invaluable banking experiences combined with
ownership and management of Condor Capital Corp., a significant
real estate holding company with investments across New England,
provided Mr. Adams with the knowledge and expertise which assisted
in the startup of Northborough Realty Holdings, LLC. As a member
and Operating Manager for the last four years Mr. Adams has
successfully developed relationships at major New England Banks
which has asserted in the development of strong deal flow with
continued positive results.
3. Richard Nadeau, Jr.- Mr. Nadeau is the founder and a shareholder of
the law firm Nadeau & Simmons, P.C. in Providence, Rhode Island.
Mr. Nadeau's primary experience is in the areas of commercial
lending and creditor's rights, including loan work outs, bankruptcy
and receiverships. Mr. Nadeau's background as a principal in
Northborough Realty Holdings, LLC and Westminster Holdings Company,
each of which locates, acquires and works out commercial and
real estate non-performing loans, will be crucial to the success of
the Company.
4. Kevin Gillis - Mr. Gillis has over twenty years of experience in
residential and commercial real estate investment and development.
He is the Chief Executive Officer and a shareholder in Condor
Capital Corp., a holding company for real estate investments across
the New England region. As a former executive with both major and
independent oil companies, Mr. Gillis gained broad experience in
site reconnaissance, construction, and the regulations and industry
practices arising out of environmentally contaminated properties.
As a member of Northborough Realty Holdings, LLC, Mr. Gillis has
been invaluable in quantifying the risks associated with properties
that have been the subject of an environmental assessment.
Additionally his knowledge in the construction and development
fields is applicable in a wide variety of situations.
<PAGE> 25
Indemnification of Officers and Directors
As permitted by Colorado law, the Company's Articles of Incorporation provide
that the Company will indemnify its directors and officers against expenses
and liabilities they incur to defend, settle, or satisfy any civil or criminal
action brought against them on account of their being or having been Company
directors or officers unless, in any such action, they are adjudged to have
acted with gross negligence or willful misconduct. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in that Act and is, therefore, unenforceable.
Exclusion of Liability
Pursuant to the Colorado Business Corporation Act, the Company's Articles of
Incorporation exclude personal liability for its directors for monetary
damages based upon any violation of their fiduciary duties as directors,
except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, acts in violation of Section 7-106-401 of the
Colorado Business Corporation Act, or any transaction from which a director
receives an improper personal benefit. This exclusion of liability does not
limit any right which a director may have to be indemnified and does not
affect any director's liability under federal or applicable state securities
laws.
CERTAIN LEGAL PROCEEDINGS
Securities Regulatory or Other Sanctions
None of the directors, officers, promoters or other members of management of
the Company has been subject to a cease trade order or bankruptcy in his
personal capacity within the previous ten-year period and none of the issuers
with which any of the directors or officers has been a director, officer,
promoter or insider has been subject to a cease trade order or bankruptcy
within the past ten years, while such director or officer was acting in that
capacity. None of the directors, officers, promoters or other member of
management of the Company has, within the ten years prior to the date of this
prospectus, been subject to any penalties or sanctions imposed by a court or
securities regulatory authority relating to trading in securities, promotion
or management of a publicly-traded issuer, or theft or fraud.
<PAGE> 26
ITEM 6. EXECUTIVE COMPENSATION
Named Executive Officers
No executive compensation has been paid to date to the Holdings Directors,
Officers or Affiliates or other persons who were executive officers of
Holdings. The following are proposed salaries for the Company's Directors,
Officers, affiliates for the fiscal year beginning January 1, 2000 will be
paid until the earlier of July 1, 2000 or vote of the Board of Directors. The
Company only intends to pay the officers a fixed salary upon the raising of
capital or described in ITEM 2.B until such time the officers set forth under
Management above will continue to perform as they previously have as members
of Realty and will only be paid upon vote of the Board of Directors.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation
Compensation Awards
------------ --------- ------------ --------------
Securities
Name and Principal Other Annual Underlying All Other
Position Salary Compensation Options/(1)/ Compensation
($) ($) (#) ($)-
- ------------------ -------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
James R. Simmons, CEO 40,000 None None None
<PAGE> 27
Long Term
Compensation
Annual Compensation
Compensation Awards
---------- --------- ----------- --------
Securities
Name and Principal Other Annual Underlying All Other
Position Salary Compensation Options/(1)/ Compensation
($) ($) (#) ($)-
- ------------------ --------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Scott B. Adams,VP 40,000 None None None
Richard Nadeau, Jr., VP 40,000 None None None
Kevin A. Gillis, VP 40,000 None None None
</TABLE>
Director Compensation
The Company does not currently reimburse directors for expenses incurred, if
any, in attending meetings of the Board of Directors. The Company does not
currently pay director fees to directors for their service on the Board.
Options Granted To Executive Officers
There are currently no options to purchase Common Shares granted to the Named
Executive Officers.
Employment Agreements
There are currently no employment agreements. It is not anticipated that
these will be implemented in the near future.
Directors' and Officers' Insurance
The Company intends to purchase liability insurance for the directors and
officers of the Company. No part of this premium will be paid by the
directors or officers of the Company.
STOCK OPTION PLAN
The Company does not currently maintain a stock option plan
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS AND PROMOTERS
No director, senior officer, promoter or other member of management or their
respective associates or affiliates have been indebted to the Company at any
time during the period ended December 31, 1999 or since that date.
<PAGE> 28
PROMOTERS
James R. Simmons, Richard Nadeau, Jr., Scott B. Adams and Kevin Gillis may be
considered to be promoters ("Promoters") of the Company as they took the
initiative in founding and organizing the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as described under "Promoters", no director or senior officer of
the Company and no person or company holding more than 10% of the Common
Shares, or any associate or affiliate thereof, has any material beneficial
interest in any transaction completed within three years prior to the date of
this prospectus or in any proposed transaction, which has or will materially
affect the Company. See "Conflicts of Interest".
CONFLICTS OF INTEREST
The Company's directors and officers are, or may become, in their individual
capacities, officers, directors, controlling shareholders and/or partners of
other entities engaged in a variety of businesses. Thus, there exist
potential conflicts of interest including, among other things, time, effort
and corporate opportunity, involved in participation with such other business
entities. Each member of management will devote such effort and attention to
the Company as the Company requires. There is presently no requirement
contained in the Company's By-Laws which requires that management of the
Company disclose to the Company business opportunities which come to their
attention. The members of management do, however, have a fiduciary duty of
loyalty to the Company to disclose to the Company any business opportunities
in the Company's line of business which come to their attention in their
capacity as an officer or director of the Company or otherwise. Excluded from
this duty are opportunities which the person learns about through his
involvement as a manager, officer or director of another business. Richard
Nadeau, Jr. and James R. Simmons may face conflicts as officers and/or
directors of the Company and serving as a contractor providing legal services
to the Company through the law firm of Nadeau & Simmons, P.C., including but
not limited to issues of U.S. securities laws, corporate legal matters and
collection matters.
DESCRIPTION OF SECURITIES
As of the date hereof, the authorized share capital of the Company consists of
a total of 100,000,000 shares; 50,000,000 of preferred shares and 50,000,000
of Common Shares, of which 1,200,000 Common Shares are issued and outstanding
and an unlimited number of preferred shares of which no preferred shares are
issued and outstanding. The following is a summary of the principal
attributes of the share capital of the Company.
<PAGE> 29
Common Shares
The rights, privileges, restrictions and conditions attached to the Common
Shares are as follows:
Voting
Holders of Common Shares shall be entitled to receive notice of and to attend
and vote at all meetings of shareholders of the Company, except meetings of
holders of another class of shares. Each Common Share shall entitle the
holder thereof to one vote.
Dividends
Subject to the preferences accorded to holders of Preferred Shares and any
other shares of the Company ranking senior to the Common Shares from time to
time with respect to the payment of dividends, holders of Common Shares shall
be entitled to receive, if, as and when declared by the Board of Directors,
such dividends as may be declared thereon by the Board of Directors from time
to time.
The Company has never paid any dividends on its Common Shares. The Company
intends to retain its earnings to finance the growth and development of its
business and does not expect to pay dividends in the near future. The Board
of Directors of the Company will review this policy from time to time having
regard to the Company's financing requirements, its financial condition
and other factors considered relevant.
Liquidation, Dissolution or Winding-Up
In the event of the voluntary or involuntary liquidation, dissolution or
winding-up of the Company, or any other distribution of its assets among its
shareholders for the purpose of winding-up its affairs (such event referred to
herein as a "Distribution"), holders of Common Shares shall be entitled,
subject to the preferences accorded to holders of Preferred Shares and any
other shares of the Company ranking senior to the Common Shares from time to
time with respect to payment on a Distribution, to share equally, share for
share, in the remaining property of the Company.
Preferred Shares
The rights, privileges, restrictions and conditions attached to the Preferred
Shares, as a class, are as follows:
<PAGE> 30
Issuance in Series
Subject to the filing of Articles of Amendment in accordance with the Business
Corporations Act (the "Act"), the Board of Directors may at any time and from
time to time issue the Preferred Shares in one or more series, each series to
consist of such number of shares as may, before the issuance thereof, be
determined by the Board of Directors.
Attributes
Subject to the filing of Articles of Amendment in accordance with the Act, the
Board of Directors may from time to time fix, before issuance, the
designation, rights, privileges, restrictions and conditions attached to each
series of Preferred Shares including, without limiting the generality of the
foregoing, the amount, if any, specified as being payable preferentially to
such series on a Distribution; the extent, if any, of further participation on
a Distribution; voting rights, if any; and dividend rights (including whether
such dividends be preferential, cumulative or non-cumulative), if any.
Restrictions of Transfer
"Affiliates" of the Company under the Securities Act of 1933, as amended (the
"Securities Act") are persons who generally include individuals or entities
that control, are controlled by, or are under common control with the Company
and may include certain officers and directors of the Company as well as
principal stockholders of the Company. Persons who are affiliates of the
Company will be permitted to sell their shares of the Company only pursuant to
an effective registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such exemptions
afforded by Section 4(1) or 4(2) of the Securities Act or Rule 144 thereunder.
A total of 1,200,000 shares of the Company Common Stock could be sold pursuant
to Rule 144 under the Securities Act.
LEGAL MATTERS
Certain legal matters relating to this Registration Statement and certain
United States securities and corporate legal matters relating to this
Registration Statement will be passed upon behalf of the Company by Mark T.
Thatcher, Esq., of Nadeau & Simmons, P.C., 1250 Turks Head Building,
Providence, Rhode Island.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Company are Rooney Plotkin & Willey, LLP
The transfer agent and registrar for the Common Shares is The Company is
serving as its own transfer agent until such time as it becomes necessary to
engage American Securities Transfer & Trust, Lakewood, CO.
<PAGE> 31
PART III
ITEM 1. MARKET FOR COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
There is no United States public market for the Company's Common Stock. The
Company's Common Stock may be traded in the over-the-counter market in the
near future, however, there can be no assurance as to the price at which
trading in the Company's Common Stock will occur.
The Company does not plan to take affirmative steps to request or encourage
any broker-dealer to act as a market maker for the Company's securities.
There are to date no understandings, agreements or discussions in place with
any such broker-dealer. Although management has set forth disclosure
throughout this registration statement indicating it would consider the public
"trading" of its securities if such activity was in the best interests of its
shareholders, it presently has no plans to do so.
(a) MARKET PRICE. The Company's Common Stock is not quoted at the present
time.
Effective August 11, 1993, the Securities and Exchange Commission adopted Rule
15g-9, which established the definition of a "penny stock," for purposes
relevant to the Company, as any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require: (i) that a broker or dealer approve
a person's account for transactions in penny stocks; and (ii) the broker or
dealer receive from the investor a written agreement to the transaction,
setting forth the identity and quantity of the penny stock to be purchased. In
order to approve a person's account for transactions in penny stocks, the
broker or dealer must (i) obtain financial information and investment
experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that
person and that person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in penny
stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form, (i) sets forth the basis on which the
broker or dealer made the suitability determination; and (ii) that the broker
or dealer received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks.
<PAGE> 32
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers NASDAQ, has recently made changes in the criteria for initial
listing on the NASDAQ Small Cap market and for continued listing. For initial
listing, a company must have net tangible assets of $4 million, market
capitalization of $50 million or net income of $750,000 in the most recently
completed fiscal year or in two of the last three fiscal years. For initial
listing, the common stock must also have a minimum bid price of $4 per share.
In order to continue to be included on NASDAQ, a company must maintain
$1,000,000 in net tangible assets and a $1,000,000 market value of its
publicly-traded securities. In addition, continued inclusion requires two
market-makers and a minimum bid price of $1.00 per share.
(b) HOLDERS. There are four (4) holders of the Company's Common Stock.
Prior to the date of this Registration Statement, the Company issued to its
officers and directors a total of $1,200,000 shares of Common Stock for a
total services valued at $389,957.
With respect to U.S. legal, reporting, financial and other information
relating to the Company, Nadeau & Simmons, P.C. whose address is 1250 Turks
Head Building, Providence, Rhode Island 02903 will file annual and periodic
reports with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934. Copies of such reports may be inspected by anyone without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington D.C. 20549, and copies may be
obtained from the Commission at prescribed rates. In addition, the Company
will provide without charge, upon the request of any stockholder, a copy of its
Annual Reports to be filed with the Commission. Any such requests should be
directed to the Secretary of the Company address 1250 Turks Head Building,
Providence, Rhode Island 02903.
ITEM 2. LEGAL PROCEEDINGS
None.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE> 33
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
<TABLE>
<CAPTION>
During the past twelve months, the Company has issued the following Common
Shares:
Date of Number of Common Issue Price Total Consideration Nature of
Issuance Shares Issued Per Share Realized ($) Consideration
- --------- ---------------- ----------- ------------------- -------------
<S> <C> <C> <C> <C>
November 24, 1999 1,200,000 .0015 n/a Founders/Services
</TABLE>
With respect to the sales made, the Company relied on Section 4(2) of the
Securities Act of 1933, as amended. No advertising or general solicitation
was employed in offering the shares. The securities were offered for
investment only and not for the purpose of resale or distribution, and the
transfer thereof was appropriately restricted.
In general, under Rule 144, a person (or persons whose shares are aggregated)
who has satisfied a one year holding period, under certain circumstances, may
sell within any three-month period a number of shares which does not exceed
the greater of one percent of the then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a two-year holding period
and who is not, and has not been for the preceding three months, an affiliate
of the Company.
Each of the sales listed above was made either for cash or for services.
Sales for which the consideration was services were made in reliance upon the
exemption from registration provided by Rule 701 adopted pursuant to Section
3(b) of the Securities Act of 1933. Sales for which the consideration was
cash were made in reliance upon the exemption from registration offered by
Section 4(2) of the Securities Act of 1933. Based upon the Preincorporation
Consultation and Subscription Agreement executed by the persons who acquired
shares for services, and the Subscription Agreement and Investment
Representations executed by persons who acquired shares for cash, and based
upon the pre-existing relationship between the cash subscribers and the
Company's officers and directors, the Company had reasonable grounds to
believe immediately prior to making an offer to the private investors, and did
in fact believe, when such subscriptions were accepted, that such purchasers
(1) were purchasing for investment and not with a view to distribution, and
(2) had such knowledge and experience in financial and business matters that
they were capable of evaluating the merits and risks of their investment and
were able to bear those risks. The purchasers had access to pertinent
information enabling them to ask informed questions. The shares were issued
without the benefit of registration. An appropriate restrictive legend is
imprinted upon each of the certificates representing such shares, and
stop-transfer instructions have been entered in the Company's transfer
records. All such sales were effected without the aid of underwriters, and no
sales commissions were paid.
<PAGE> 34
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles 7-109-101 through 7-109-109 of the Colorado Business Corporation Act
provides that any director or officer of a Colorado corporation may be
indemnified against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by him in connection with or in defending any
action, suit or proceeding in which he is a party by reason of his position,
so long as it shall be determined that he conducted himself in good faith and
that he reasonably believed that his conduct was in the corporation's best
interest. If a director or officer is wholly successful, on the merits or
otherwise, in connection with such proceeding, such indemnification is
mandatory.
The Company's articles of incorporation contain provisions which provide,
among other things, that the Company shall indemnify certain persons,
including officers and directors, against judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection
with any action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. As to any action
brought by or in the right of the Company, such indemnification is limited to
expenses (including attorney's fees) actually and reasonably incurred in
connection with the defense or settlement of the case, and shall not be made,
absent court approval, if it was determined that such person was liable for
negligence or misconduct in the performance of his duty to the Company.
The Company's Bylaws contain provisions which provide, among other things,
that the Company shall indemnify certain persons, including officers and
directors, against judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with any action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interest of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. As to any action brought by or in the right of the
Company, such indemnification is limited to expenses (including attorney's
fees) actually and reasonably incurred in connection with the defense or
settlement of the case, and shall not be made, absent court approval, if it
was determined that such person was liable for negligence or misconduct in the
performance of his duty
to the Company.
The Articles of Incorporation and the Bylaws of the Company, filed as Exhibits
3.1 and 3.2, respectively, provide that the Company will indemnify its
officers and directors for costs and expenses incurred in connection with the
defense of actions, suits, or proceedings where the officer or director acted
in good faith and in a manner he reasonably believed to be in the Company's
best interest and is a party by reason of his status as an officer or
director, absent a finding of negligence or misconduct in the performance of
duty.
<PAGE> 35
FINANCIAL STATEMENTS AND EXHIBITS
(a) The following financial statements of the Company
are filed as part of this registration statement:
<PAGE>
NORTHBOROUGH HOLDINGS, INC.
Index to Combined Financial Statements
December 31, 1999 and 1998
Page
Independent Auditors' Report 1
Combined Balance Sheets 2
Combined Statements of Operations 3
Combined Statements of Changes in Members' Equity 4
Combined Statements of Cash Flows 5
Notes to Combined Financial Statements 6
<PAGE> F-1
INDEPENDENT AUDITORS' REPORT
To the Owners
Northborough Holdings, Inc.
Providence, Rhode Island
We have audited the accompanying combined balance sheets of Northborough
Holdings, Inc. (as defined in Note 1A) as of December 31, 1999 and 1998, and
the related combined statements of operations, changes in members' equity, and
cash flows for the years then ended. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Northborough
Holdings, Inc. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Rooney Plotkin & Willey LLP
_____________________________
ROONEY, PLOTKIN & WILLEY, LLP
February 4, 2000
<PAGE> F-2
NORTHBOROUGH HOLDINGS, INC.
Combined Balance Sheets
December 31, 1999 and 1998
1999 1998
ASSETS
Assets:
Cash $ 5,910 $ 4,881
Notes Receivable (Note 2) 108,994 53,634
Mortgage Loans and Other Receivable, Net (Note 3) 436,778 384,570
Real Estate Under Operating Lease, Net (Notes 4 and 8) 164,857 170,853
Other Assets 105,000 100,417
Total Assets $ 821,539 $ 714,355
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Note Payable, Bank (Note 6) $ 37,000 $ 230,000
Accrued Distributions 240,000 -
Accrued Expenses 15,250 250
Long-Term Debt (Note 7) 136,682 -
Security Deposit 2,650 2,650
Total Liabilities 431,582 232,900
Members' Equity 389,957 481,455
Total Liabilities and Members' Equity $ 821,539 $ 714,355
<PAGE> F-3
NORTHBOROUGH HOLDINGS, INC.
Combined Statements of Operations
Years Ended December 31, 1999 and 1998
1999 1998
Operating Revenues:
Interest Income $ 150,492 $ 77,944
Fee Income 31,327 4,500
Gain on Disposition of Mortgage Loans 70,950 97,797
Total Operating Revenues 252,769 180,241
General and Administrative Expenses 31,286 19,871
Income from Operations 221,483 160,370
Other Income (Expense):
Rental Income, Net (Note 8) 24,474 34,045
Gain on Sale of Property - 35,349
Interest Income 4,529 8,020
Interest Expense on Note Payable, Bank (1,984) (2,253)
Total Other Income 27,019 75,161
Net Income $ 248,502 $ 235,531
<PAGE> F-4
NORTHBOROUGH HOLDINGS, INC.
Combined Statements of Changes in Members' Equity
Years Ended December 31, 1999 and 1998
1999 1998
Members' Equity, Beginning of Year $ 481,455 $ 527,924
Net Income 248,502 235,531
Distributions to Members (340,000) (282,000)
Members' Equity, End of Year $ 389,957 $ 481,455
<PAGE> F-5
NORTHBOROUGH HOLDINGS, INC.
Combined Statements of Cash Flows
Years Ended December 31, 1999 and 1998
1999 1998
Operating Activities:
Net Income $ 248,502 $ 235,531
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 5,996 3,516
Gain on Sale of Property - (35,349)
Gain on Disposition of Mortgage Loans (70,950) (97,797)
Change In:
Accrued Expenses 15,000 250
Total Adjustments (49,954) (129,380)
Net Cash Provided by Operating Activities 198,548 106,151
Investing Activities:
Purchases of Land and Building Improvements - (51,864)
Notes Receivable (70,000) -
Repayments on Notes Receivable 14,640 82,366
Purchases of Mortgage Loans and Other Receivable (221,200) (382,209)
Repayments Collected on Mortgage Loans 23,992 -
Proceeds on Disposition of Mortgage Loans 215,950 190,437
Other (4,583) 103,076
Net Cash Used in Investing Activities (41,201) (58,194)
Financing Activities:
Proceeds from Issuance of Long-Term Debt 139,000 -
Net Borrowings (Repayments) on Note Payable, Bank (193,000) 230,000
Principal Payments on Long-Term Debt (2,318) -
Distributions to Members (100,000) (282,000)
Net Cash Used in Financing Activities (156,318) (52,000)
Increase (Decrease) in Cash 1,029 (4,043)
Cash, Beginning of Year 4,881 8,924
Cash, End of Year $ 5,910 $ 4,881
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for Interest $ 3,999 $ 2,253
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
During 1999 the Company declared $240,000 of member distributions which were
paid in January 2000. During 1998 the Company originated notes receivable of
$136,000 in connection with the sale of property.
<PAGE> F-6
NORTHBOROUGH HOLDINGS, INC.
Notes to Combined Financial Statements
December 31, 1999 and 1998
1. Summary of Operations and Significant Accounting Policies:
A. Organization and Principles of Combination:
Northborough Holdings, Inc. is composed of the following entities affiliated
through common ownership:
Northborough Holdings, Inc. (NHI), a Colorado corporation
Northborough Realty Holdings, LLC (NRH), a Rhode Island limited liability
company
NHI was organized on November 20, 1999 to become the holding company for NRH.
As of December 31, 1999 there was no activity in the NHI entity. There were
no business transactions in the NHI entity for the year ended December 31,
1999. NRH (the Company) is a privately held limited liability company
organized under Rhode Island law. The Company was organized on May 29, 1996
and terminates no later than May 29, 2046. The Company is principally
engaged in the acquisition and subsequent sale of distressed financial assets,
primarily commercial mortgage loans acquired from financial institutions and
other entities at a discount. The Company manages these assets by collecting
payments based on the original terms or renegotiated terms, or by foreclosure
and liquidation of the collateral. The Company also originates mortgage
loans, performs collections activity for a fee and operates a rental property
acquired in a foreclosure transaction.
B. Notes Receivable:
Notes receivable represent mortgage financing originated by the Company.
Notes receivable are recorded at the aggregate lower of cost or market and
are collateralized by commercial property, personal guarantees, and other
business assets. Management believes that the value of such collateral is in
excess of the notes receivable as of December 31, 1999 and 1998 and therefore,
no allowance has been provided.
C. Mortgage Loans and Other Receivable, Net:
Mortgage loans and other receivable represent notes and other financial
assets acquired at a discount and are recorded at cost. All mortgage loans
and the other receivable are collateralized by commercial property.
Management believes that the value of such collateral is in excess of cost as
of December 31, 1999 and 1998 and therefore, no allowance has been provided.
<PAGE> F-7
1. Summary of Operations and Significant Accounting Policies: (Continued)
D. Real Estate Under Operating Lease:
Real estate acquired through foreclosure is recorded at the fair value of the
property at the time of the foreclosure auction. The property acquired is
primarily used as an income-producing asset. Capitalizable improvements to
real property are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets.
E. Revenue Recognition:
Discount amortization revenue is recognized to the extent payments received
are earned and is included in operating revenues as interest income. Gain or
loss on the disposition of these financially distressed assets is calculated
based on gross proceeds from the sale of the asset or collateral, less the
expenses related to the sale or foreclosure, less the book value of the asset.
F. Income Taxes:
NRH, by unanimous consent of its members, has elected to be treated as a
partnership for income tax purposes and as such is not taxed. Under
subchapter K of the Internal Revenue Code each member is taxed separately on
their distributive share of the Company's income whether or not that income
is actually distributed.
G. Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ from those estimates.
<PAGE> F-8
2. Notes Receivable:
Notes receivable originated by the Company consist of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
10.00% note receivable of $56,000 due in monthly principal
and interest installments of $467 from July 1, 1998 to
May 1, 2001. The note is due in full on June 1, 2001.
Secured by real estate, personal guarantee and other business
assets. $ 46,994 $ 53,634
Note receivable of $50,000 due in monthly principal
installments of $1,000 for August and September 1999,
$2,000 for October 1999 to January 2000, and $5,000
for February and March 2000, plus accrued interest.
The remaining principal and interest on the note is due
in full on April 1, 2000. The interest rate is adjustable
to 2.75% over prime and at December 31, 1999 was
11.25%. Secured by real estate and other business
assets. 44,000 -
14.00% note receivable of $20,000 due in monthly principal
installments of $1,000 from November 1, 1999 through
June 1, 2001, plus interest. Secured by real estate, other
business assets, and a personal guarantee. 18,000 -
Total Notes Receivable $ 108,994 $ 53,634
Notes receivable mature as follows:
Year ending December 31,
2000 $ 57,005
2001 51,989
$ 108,994
</TABLE>
<PAGE> F-9
3. Mortgage Loans and Other Receivable, Net:
Mortgage loans and other receivable acquired at a discount consist of the
following:
1999 1998
Original Principal Amount $ 972,394 $ 818,777
Unamortized Discount (535,616) (434,207)
Mortgage Loans and Other Receivable, Net $ 436,778 $ 384,570
Original loans consist of the following at
December 31, 1999:
Principal Unamortized
Amount Discount
8.30% mortgage loan, due 2008 $ 437,400 $ 266,083
10.50% mortgage loan, due 1989 242,404 187,404
8.00% mortgage loan, due 1996 99,585 9,485
9.05% mortgage loan, due 1998 68,735 635
10.50% mortgage loan, due 2012 40,231 28,559
11.50% mortgage loan, due 1999 32,700 24,700
10.50% mortgage loan, due 2002 21,254 8,665
Other non-interest bearing secured receivable,
due 1995 30,085 10,085
Totals $ 972,394 $ 535,616
Original loans consist of the following at
December 31, 1998:
Unamortized
Principal Discount
Amount (Premium)
8.30% mortgage loan, due 2008 $ 440,596 $ 268,026
11.00% mortgage loan, due 1994 234,447 129,447
10.50% mortgage loan, due 2012 44,892 29,892
9.75% mortgage loan, due 2002 38,277 6,276
8.00% mortgage loan, due 2002 30,480 (9,519)
Other non-interest bearing secured
receivable, due 1995 30,085 10,085
Totals $ 818,777 $ 434,207
The discounts are based on imputed interest rates ranging from 8.00% to
11.50%.
<PAGE> F-10
4. Real Estate Under Operating Lease, Net:
Real estate under operating lease consists of the following:
1999 1998
Land and Improvements $ 60,075 $ 60,075
Building and Improvements 114,500 114,500
Accumulated Depreciation (9,718) (3,722)
Real Estate Under Operating Lease, Net $ 164,857 $ 170,853
The Company is a lessor of the above real estate. See Note 8.
5. Other Assets:
Other assets consist of the following:
1999 1998
Certificate of Deposit $ 100,000 $ 100,417
Other Deposit 5,000 -
Other Assets $ 105,000 $ 100,417
At December 31, 1999 and 1998 $100,000 of the certificate of deposit was
pledged to the line of credit. See Note 6.
6. Note Payable, Bank:
The Company has a $400,000 demand line of credit agreement with a local
bank. Interest at the lender's base rate is payable monthly. The interest
rate was 8.50% and 7.75% at December 31, 1999 and 1998, respectively. The
line of credit is secured by a pledge of a certificate of deposit of $100,000,
limited guarantee of the members of the Company, and a security interest in all
business assets. See Note 5.
<PAGE> F-11
7. Long-Term Debt:
Long-term debt consists of an 8.59% mortgage note payable to a local bank.
The mortgage is due in monthly principal installments of $1,159 plus
interest. A final installment of principal and interest is due September 30,
2004. The mortgage includes certain covenant provisions including, but not
limited to, maintenance of the property, insurance coverage and the
maintenance of an operating cash flow to debt service ratio. Interest
expense on all debt was $3,999 and $2,253 at December 31, 1999 and 1998,
respectively. The mortgage note payable matures as follows:
Year ending December 31,
2000 $ 13,908
2001 13,908
2002 13,908
2003 13,908
2004 81,050
$ 136,682
8. Rental Income:
The Company leases its land, building and improvements under an operating
lease. The initial five-year term of the lease expires December 31, 2002.
The lease is renewable, at the lessee's option, for one additional five-year
term. The base monthly rent was $2,850 and $2,650 for 1999 and 1998,
respectively, and it increases $200 per year during the initial lease term.
Rental income for the years ended December 31, 1999 and 1998 was $42,723 and
$37,714, respectively and is presented net of depreciation, property taxes,
mortgage interest, and repair and maintenance charges. The initial lease
term includes a provision for additional rent based on the cost of land
improvements incurred by the Company. See Note 4.
Future minimum rental receipts under this operating lease are as follows:
Year ending December 31,
2000 $ 44,254
2001 46,654
2002 49,054
$ 139,962
<PAGE> F-12
9. Subsequent Events:
A. Northborough Realty Holdings, LLC:
Subsequent to year end December 31, 1999, the Company borrowed
$340,000 on its line of credit, made purchases of mortgage loans totaling
$110,000 and made member distributions of $240,000.
B. Northborough Holdings, Inc.:
On December 28, 1999 NHI entered into an agreement with NRH to acquire all of
the membership interests of NRH for common stock of NHI in a tax-free
exchange. The transaction is expected to close in the first quarter of
2000. NHI, a C-corporation, will be subject to federal and state corporate
income taxes on the income of NRH.
NORTHBOROUGH REALTY HOLDINGS, LLC
FORECASTED FINANCIAL STATEMENTS
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 ACTUAL HISTORICAL RESULTS
BALANCE SHEETS
1997 1998 1999
ASSETS
CURRENT ASSETS:
CASH 8,924 4,881 5,910
INVESTMENTS AND MARKETABLE SECURITIES 206,355 100,417 105,000
LOAN PORTFOLIO 151,001 438,204 545,772
TOTAL CURRENT ASSETS 366,280 543,502 656,682
FIXED ASSETS:
LAND 33,473 26,00 26,000
BUILDINGS AND IMPROVEMENTS 133,890 148,575 148,575
TOTAL FIXED ASSETS 167,363 174,575 174,575
LESS ACCUMULATED DEPRECIATION 293 3,722 9,718
NET FIXED ASSETS 167,070 170,853 164,857
OTHER ASSETS:
INTANGIBLES
LESS ACCUMULATED AMORTIZATION
TOTAL OTHER ASSETS
TOTAL ASSETS 533,350 714,355 821,539
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE
NOTES PAYABLE-CURRENT 0 27,336
NOTES PAYABLE-LINE 230,000 37,000
OTHER CURRENT LIABILITIES 5,000 2,650 257,650
INCOME TAXES 426 250 250
TOTAL CURRENT LIABILITIES 5,426 232,900 322,236
OTHER LIABILITIES:
NOTE PAYABLE 0 0 136,682
LESS CURRENT PORTION 0 0 27,336
TOTAL OTHER LIABILITIES 0 0 109,346
STOCKHOLDERS'/ OWNERS' EQUITY:
COMMON STOCK/CAPITAL 300,000 300,000 300,000
PREFERRED STOCK
RETAINED EARNINGS/ACCUMULATED CAPITAL 227,924 181,455 89,957
CURRENT PERIOD P&L 0 0 0
TOTAL STOCKHOLDERS' EQUITY 527,924 481,455 389,957
TOTAL LIABILITIES & STOCKHOLDERS'EQUITY 533,350 714,355 821,539
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
<PAGE>
NORTHBOROUGH REALTY HOLDINGS, LLC
PROJECTED FINANCIAL STATEMENTS
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 ACTUAL HISTORICAL RESULTS
STATEMENTS OF RETAINED EARNINGS/CAPITAL
1997 1998 1999
RETAINED EARNINGS/ ACCUMULATED CAPITAL-BEGINNING 2,066 227,924 181,455
NET EARNINGS 736,858 235,531 248,502
LESS DISTRIBUTIONS (511,000)(282,000) (340,000)
RETAINED EARNINGS/ ACCUMULATED CAPITAL-ENDING 227,924 181,455 89,957
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
<PAGE>
NORTHBOROUGH REALTY HOLDINGS, LLC
FORECASTED FINANCIAL STATEMENTS
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 ACTUAL HISTORICAL RESULTS
STATEMENTS OF NET INCOME
1997 1998 1999
REVENUES:
RENTAL INCOME 3,788 37,714 42,724
DEBT COLLECTION FEE INCOME 4,500 31,327
INTEREST AND MARKET DISCOUNT INCOME 600,116 175,741 221,442
GAIN ON SALES 259,492 35,349
INVESTMENT INTEREST INCOME 5,855 8,020 4,529
TOTAL INCOME 869,251 261,324 300,022
GENERAL & ADMINISTRATIVE EXPENSES:
SALARIES & WAGES
OFFICERS SALARIES
PAYROLL TAXES
HEALTH INSURANCE BENEFITS
RENT
UTILITIES
INSURANCE 8,060 2,338 1,388
OFFICE SUPPLIES & EXPENSE 4,443 645 877
OFFICE EQUIPMENT
POSTAGE 177 363
TELEPHONE & INTERNET
ACCOUNTING & AUDIT 3,450 4,050 18,625
LEGAL 39,181 0 6,954
OTHER PROFESSIONAL FEES 23,973 5,000 1,263
TRAVEL & ENTERTAINMENT 30,104 3,979 1,507
AMORTIZATION
RENTAL EXPENSES 8,679 18 12,253
DEPRECIATION 214 3,651 5,996
TAXES 250 926 250
INTEREST EXPENSE 12,860 2,253 1,984
MISCELLANEOUS 1,179 2,756 60
TOTAL GENERAL & ADMINISTRATIVE EXPENSES 132,393 25,793 51,520
INCOME BEFORE TAXES 736,858 235,531 248,502
PROVISION FOR INCOME TAXES 0 0 0
NET INCOME 736,858 235,531 248,502
CUMULATIVE NET INCOME
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
<PAGE>
NORTHBOROUGH REALTY HOLDINGS, LLC
FORECASTED FINANCIAL STATEMENTS
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 ACTUAL HISTORICAL RESULTS
STATEMENTS OF CASH FLOW
1997 1998 1999
OPERATING ACTIVITIES
NET INCOME 736,858 235,531 248,502
ADD:
DEPRECIATION 214 3,651 5,996
AMORTIZATION 0 0 0
737,072 239,182 254,498
ADJUSTMENTS:
ACCOUNTS PAYABLE
ACCRUED EXPENSES 6,443 (2,526) 15,000
ACCRUED INCOME TAXES 0 0 0
TOTAL FROM OPERATIONS 743,515 236,656 269,498
INVESTING ACTIVITIES:
ACQUISITION OF FIXED ASSETS (167,363) (7,212) 0
INVESTMENT IN LOAN PORTFOLIO-NET 148,999 (287,202) (107,568)
INVESTMENTS AND MARKETABLE SECURITIES (206,355) 105,938 (4,583)
OTHER 0 (223) 0
TOTAL FROM INVESTING ACTIVITIES (224,719) (188,699) (112,151)
FINANCING ACTIVITIES:
PROCEEDS FROM BORROWINGS:
NOTE PAYABLE 139,000
LINE 230,000
REPAYMENT OF DEBT:
NOTE PAYABLE (2,318)
LINE (193,000)
DIVIDENDS DISTRIBUTIONS PAID (511,000) (282,000) (100,000)
ISSUANCE OF PREFERRED STOCK 0 0 0
TOTAL FROM FINANCING ACTIVITIES (511,000) (52,000) (156,318)
INCREASE(DECREASE) IN CASH 7,796 (4,043) 1,029
CASH BEGINNING OF YEAR 1,128 8,924 4,881
CASH END OF YEAR 8,924 4,881 5,910
CASH PAID FOR:
INTEREST 12,860 2,253 3,999
TAXES 250 926 250
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
<PAGE>
<TABLE>
<CAPTION>
NORTHBOROUGH REALTY HOLDINGS, LLC
FORECASTED FINANCIAL STATEMENTS
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 YEAR YEAR YEAR
BALANCE SHEETS ONE TWO THREE
BEGINNING TOTAL TOTAL TOTAL
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH 5,910 368,830 691,981 271,019
INVESTMENTS AND MARKETABLE SECURITIES 105,000 529,272 191,055 200,830
LOAN PORTFOLIO 545,772 2,322,492 3,395,955 5,015,529
TOTAL CURRENT ASSETS 656,682 3,220,593 4,278,991 5,487,378
FIXED ASSETS:
LAND 26,000 26,000 26,000 26,000
BUILDINGS AND IMPROVEMENTS 148,575 1,148,575 1,148,575 1,148,575
TOTAL FIXED ASSETS 174,575 1,174,575 1,174,575 1,174,575
LESS ACCUMULATED DEPRECIATION 9,718 27,192 56,270 85,348
NET FIXED ASSETS 164,857 1,147,383 1,118,305 1,089,227
OTHER ASSETS:
INTANGIBLES 0 50,000 50,000 50,000
LESS ACCUMULATED AMORTIZATION 0 9,167 19,167 29,167
TOTAL OTHER ASSETS 0 40,833 30,833 20,833
TOTAL ASSETS 821,539 4,408,809 5,428,129 6,597,438
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE 0 10,000 15,000 20,000
NOTES PAYABLE-CURRENT 27,336 27,336 27,336 27,336
NOTES PAYABLE-LINE 37,000 0 0 0
OTHER CURRENT LIABILITIES 257,650 257,650 257,650 257,650
INCOME TAXES 250 282,277 424,316 315,191
TOTAL CURRENT LIABILITIES 322,236 577,263 724,302 620,177
OTHER LIABILITIES:
NOTE PAYABLE 136,682 109,346 82,009 54,673
LESS CURRENT PORTION 27,336 27,336 27,336 27,336
TOTAL OTHER LIABILITIES 109,346 82,010 54,673 27,337
STOCKHOLDERS'/ OWNERS' EQUITY:
COMMON STOCK/CAPITAL 300,000 300,000 300,000 300,000
PREFERRED STOCK 3,000,000 3,000,000 3,000,000
RETAINED EARNINGS/ACCUMULATED CAPITAL 89,957 89,957 449,537 1,349,155
CURRENT PERIOD P&L 0 359,580 899,618 1,300,770
TOTAL STOCKHOLDERS' EQUITY 389,957 3,749,537 4,649,155 5,949,925
TOTAL LIABILITIES & STOCKHOLDERS'EQUITY 821,539 4,408,809 5,428,129 6,597,438
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
</TABLE>
<PAGE>
NORTHBOROUGH REALTY HOLDINGS, LLC
FORECASTED FINANCIAL STATEMENTS YEAR YEAR YEAR
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 ONE TWO THREE
STATEMENTS OF NET INCOME
TOTAL TOTAL TOTAL
REVENUES:
RENTAL INCOME 92,000 180,000 216,000
DEBT COLLECTION FEE INCOME 18,000 18,000 18,000
INTEREST AND MARKET DISCOUNT INCOME 165,095 358,388 514,238
GAIN ON SALES 736,640 1,738,268 2,490,213
INVESTMENT INTEREST INCOME 74,272 11,783 9,775
TOTAL INCOME 1,086,007 2,306,440 3,248,226
GENERAL & ADMINISTRATIVE EXPENSES:
SALARIES & WAGES 45,000 112,500 180,000
OFFICERS SALARIES 144,000 174,000 204,000
PAYROLL TAXES 18,900 28,650 38,400
HEALTH INSURANCE BENEFITS 45,600 57,300 69,000
RENT 36,000 50,400 64,800
UTILITIES 2,400 4,200 6,000
INSURANCE 2,400 6,000 9,600
OFFICE SUPPLIES & EXPENSE 9,600 16,800 24,000
OFFICE EQUIPMENT 10,000 20,000 10,000
POSTAGE 2,400 6,000 9,600
TELEPHONE & INTERNET 4,800 12,000 19,200
ACCOUNTING & AUDIT 12,000 18,000 24,000
LEGAL 45,000 105,000 165,000
OTHER PROFESSIONAL FEES 6,000 6,000 6,000
TRAVEL & ENTERTAINMENT 6,000 12,000 18,000
AMORTIZATION 9,167 10,000 10,000
RENTAL EXPENSES 15,000 19,200 24,000
DEPRECIATION 17,474 29,078 29,078
TAXES 0 0 0
INTEREST EXPENSE 10,359 8,052 5,744
MISCELLANEOUS 1,800 4,800 9,000
TOTAL GENERAL & ADMINISTRATIVE EXPENSES 443,900 699,980 925,422
INCOME BEFORE TAXES 642,107 1,606,460 2,322,804
PROVISION FOR INCOME TAXES 282,527 706,843 1,022,034
NET INCOME 359,580 899,618 1,300,770
CUMULATIVE NET INCOME
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
<PAGE>
NORTHBOROUGH REALTY HOLDINGS, LLC
FORECASTED FINANCIAL STATEMENTS YEAR YEAR YEAR
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 ONE TWO THREE
STATEMENTS OF CASH FLOW
TOTAL TOTAL TOTAL
OPERATING ACTIVITIES
NET INCOME 359,580 899,618 1,300,770
ADD:
DEPRECIATION 17,474 29,078 29,078
AMORTIZATION 9,167 10,000 10,000
386,221 938,696 1,339,848
ADJUSTMENTS:
ACCOUNTS PAYABLE 10,000 5,000 5,000
ACCRUED EXPENSES 0 0 0
ACCRUED INCOME TAXES 282,027 142,039 (109,125)
TOTAL FROM OPERATIONS 678,248 1,085,734 1,235,723
INVESTING ACTIVITIES:
ACQUISITION OF FIXED ASSETS (1,000,000) 0 0
INVESTMENT IN LOAN PORTFOLIO-NET (1,776,720)(1,073,463)(1,619,574)
INVESTMENTS AND MARKETABLE SECURITIES (424,272) 338,217 (9,775)
OTHER (50,000) 0 0
TOTAL FROM INVESTING ACTIVITIES (3,250,992) (735,247)(1,629,349)
FINANCING ACTIVITIES:
PROCEEDS FROM BORROWINGS:
NOTE PAYABLE 0 0 0
LINE 0 0 0
REPAYMENT OF DEBT:
NOTE PAYABLE (27,336) (27,336) (27,336)
LINE (37,000) 0 0
DIVIDENDS DISTRIBUTIONS PAID 0 0 0
ISSUANCE OF PREFERRED STOCK 0 0 0
TOTAL FROM FINANCING ACTIVITIES 2,935,664 (27,336) (27,336)
INCREASE(DECREASE) IN CASH 362,920 323,151 (420,962)
CASH BEGINNING OF YEAR 5,910 368,830 691,981
CASH END OF YEAR 368,830 691,981 271,019
CASH PAID FOR:
INTEREST 10,359 8,052 5,744
TAXES 500 564,804 1,131,158
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
<PAGE>
NORTHBOROUGH REALTY HOLDINGS, LLC
FORECASTED FINANCIAL STATEMENTS YEAR YEAR YEAR
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 ONE TWO THREE
SUPPLEMENTAL SCHEDULES
TOTAL TOTAL TOTAL
LOAN PORTFOLIO:
BALANCE BEGINNING 545,772 2,322,492 3,395,955
PURCHASES-FROM CAPITAL INVESTMENT 1,650,000 350,000 0
PURCHASES-REINVESTMENT 1,600,000 4,200,000 6,600,000
LIQUIDATIONS (1,473,280)(3,476,537)(4,980,426)
BALANCES ENDING 2,322,492 3,395,955 5,015,529
INCOME EARNED:
ON OUTSTANDING BALANCE 165,095 358,388 514,238
ON LIQUIDATION 736,640 1,738,268 2,490,213
INVESTMENTS
BALANCE BEGINNING 105,000 529,272 191,055
ADDITIONS 3,000,000 0 0
REDUCTIONS:
TO LONG-TERM INVESTMENTS (1,000,000) 0 0
TO LOAN PORTFOLIO (1,650,000) (350,000) 0
INCOME 74,272 11,783 9,775
BALANCE ENDING 529,272 191,055 200,830
INCOME 76,477 10,374 9,815
INCOME TAX LIABILITIES:
BALANCE BEGINNING 250 282,277 424,316
ACCRUED TAX LIABILITY 282,527 706,843 1,022,034
ESTIMATED PAYMENT (500) (564,804)(1,131,158)
BALANCE ENDING 282,277 424,316 315,191
ACCOUNTS PAYABLE
BALANCE BEGINNING 0 10,000 15,000
INCREASE (DECREASE) 10,000 5,000 5,000
BALANCE ENDING 10,000 15,000 20,000
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
<PAGE>
NORTHBOROUGH REALTY HOLDINGS, LLC
FORECASTED FINANCIAL STATEMENTS YEAR YEAR YEAR
UNDER THE HYPOTHETICAL ASSUMPTIONS IN NOTE 1 ONE TWO THREE
SUPPLEMENTAL SCHEDULES
TOTAL TOTAL TOTAL
NOTES PAYABLE
LINE
BALANCE BEGINNING 37,000 0 0
PROCEEDS 0 0 0
REPAYMENTS (37,000) 0 0
BALANCE ENDING 0 0 0
INTEREST 9.50% 0 0 0
NOTE PAYABLE-TERM
BALANCE BEGINNING 136,682 109,346 82,009
PROCEEDS 0 0 0
REPAYMENTS 60 (27,336) (27,336) (27,336)
BALANCE ENDING 109,346 82,009 54,673
INTEREST 8.50% 10,359 8,036 5,712
TOTAL INTEREST 10,359 8,036 5,712
SEE SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANTS' REPORT
<PAGE>
Northborough Realty Holdings, LLC
Notes to Forecasted Financial Statements
January 1, 2000
1. Nature of Forecasted Financial Statements
The accompanying forecasted financial statements of Northborough Realty
Holdings, LLC presents information, to the best of managements' knowledge and
belief on the financial condition and results of operations for the forecast
period. Accordingly, the forecast reflects its judgment as of January 1,
2000, the date of the forecast, of the expected conditions and its expected
course of action. The assumptions disclosed herein are those that management
believes are significant to the forecast. There will usually be differences
between forecasted and actual results, because events and circumstances
frequently do not occur as expected and those differences may be material.
2. Organization:
Northborough Realty Holdings, LLC (the Company), started operations in 1996.
The Company acquires distressed financial assets from financial institutions
at discounts. It manages these assets either by collecting the debts,
renegotiating terms, selling or liquidating the assets. The Company has
historically operated as a Limited Liability Company (LLC) and the members
have paid the entity income taxes.
3. Forecasted Capital Contribution - $3,000,000:
The accompanying forecasted financial statements anticipate a preferred
minority investment of $3,000,000. It is forecasted that the corporate
structure will be changed and the entity will assume the obligations to pay
income taxes at corporate rates. The preferred minority investment is
classified as preferred stock. No preferred dividend has been included in
these forecasts.
4. Other Significant Forecasted Assumptions:
A. Investments and Marketable Securities:
Idle cash is assumed to be invested in short term marketable securities that
will earn a 5% return recorded as investment interest income.
B. Loan Portfolio:
It is anticipated that it will take at least 15 months to fully invest the
forecasted capital contribution into working assets. The loan portfolio is
expected to liquidate 10% of its portfolio per month and realize a 50% margin
on liquidation of assets. The loan portfolio is anticipated to earn ongoing
a 12% return on book value during its holding period.
<PAGE>
Northborough Realty Holdings, LLC
Notes to Forecasted Financial Statements
January 1, 2000
4. Other Significant Forecasted Assumptions: (Continued)
C. Fixed Assets:
In some cases the Company has foreclosed on real estate properties and held
the assets as long term investments. It is anticipated that $1,000,000 of
the capital contribution described in Note 2 would be invested in fixed assets
producing rental income. These assets are depreciated over a 40 year life.
D. Income Taxes:
As described in Note 2 it is anticipated that the Company will change its tax
status and incur the liability for income taxes that have historically been
paid at the member level. A 44% Federal and State income tax rate has been
assumed.
E. Stockholders Equity:
As stated above the Company has historically operated as a limited liability
company. The Company was originally capitalized with $300,000 from the
members. Through 1999, the Company will have retained $252,000 of
accumulated capital which has been treated the same as retained earnings for
purposes of these forecasts. The actual accounting treatment may vary
depending on the corporate structure elected for the new entity.
F. New Loan Offices:
It is forecasted that the Company will open four new loan offices over the
three year forecasted period. Each satellite office will incur the following
increased annual costs plus a one time equipment cost of $10,000.
Salaries and Wages $45,000
Payroll Taxes 4,500
Fringe Benefits 7,800
Rent 9,600
Office Supplies 7,200
Telephone and Utilities 6,000
Insurance 2,400
Travel and Entertainment 3,000
$85,500
<PAGE>
Northborough Realty Holdings, LLC
Notes to Forecasted Financial Statements
January 1, 2000
5. Spreadsheet Rounding Errors:
The accompanying forecasted financial statements use spreadsheet calculations
that may result in small rounding errors on column totals.
<PAGE>
PART III
ITEM I. INDEX TO EXHIBITS
(b) Exhibits
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Not applicable
7 Not applicable
9 Not applicable
10.1 MATERIAL CONTRACTS
11 Not applicable
14 Not applicable
16 Not applicable
21 Not applicable
22.1 Subsidiaries of the Registrant
23.1 Consent of Counsel, Mark T. Thatcher of Nadeau & Simmons, P.C.
23.2 Consent of Rooney, Plotkin & Willey, LLP, Certified Public Accountant
24 Not applicable
27 Financial Data Schedule
28 Not applicable
99 Not applicable
99.1 Safe Harbor Compliance Statement
ITEM 2. DESCRIPTION OF EXHIBITS
See Item I above.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: March 17, 2000
/s/ James R. Simmons
By:_________________________
James R. Simmons
Chief Executive Officer
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NORTHBOROUGH HOLDINGS, INC.
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned incorporator, being a natural person of the age of
eighteen (18) years or more, and desiring to form a corporation under the laws
of the State of Colorado, does hereby sign, verify and deliver in duplicate to
the Secretary of State of the State of Colorado these Articles of
Incorporation.
ARTICLE I
NAME
The name of the corporation shall be NORTHBOROUGH HOLDINGS, INC.
The principal office and address is 17 W. Cheyenne Mtn. Blvd., Colorado
Springs, CO 80906.
ARTICLE II
PERIOD OF DURATION
This corporation shall exist perpetually unless dissolved according to
law.
ARTICLE III
PURPOSE
To engage in the business of financial services, acquisition of real
estate and related transactions, mergers and acquisitions; and to transact any
lawful business or businesses for which corporations may be incorporated
pursuant to the Colorado Business Corporation Act.
<PAGE>
ARTICLE IV
POWERS
In furtherance of the foregoing purposes the corporation shall have and
may exercise all of the rights, powers and privileges now or hereafter
conferred upon corporations organized under the Colorado Business Corporation
Act, as amended, or by law. In addition, it may do everything necessary,
suitable or proper for the accomplishment of any corporate purpose.
ARTICLE V
CAPITAL
The total number of shares of the capital stock which the Corporation has
authority to issue is one hundred million (100,000,000) shares, divided into
fifty million (50,000,000) shares of common stock with no par value per share
(the "Common Stock"), and fifty million (50,000,000) shares of Series A
Convertible Preferred Stock with a par value of $100 per share (hereinafter
sometimes referred to as the "Series A Convertible Preferred Stock" or the
"Preferred Stock").
The aggregate number of common shares which this corporation shall have
the authority to issue is fifty million (50,000,000), each without par value
which shares shall be designated common stock. No share shall be issued
without consideration being exchanged, and it shall thereafter be
nonassessable. The Board of Directors may determine by a majority vote if
gifts of shares will be allowed under certain circumstances.
Shares of the corporation not having a par value shall be issued for such
consideration expressed in dollars as may be fixed from time to time by the
vote of the director(s).
The following is a description of each class of stock of the Corporation
with the preferences, conversion and other rights, restrictions, voting
powers, limitations as to distributions, qualifications, and terms and
conditions of redemption of each class:
FIRST: In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, the holders of any Preferred
Stock then outstanding shall be paid out of the assets of the Corporation
available for distribution to its stockholders an amount equal to One Dollar
($1.00) per share plus an amount equal to all unpaid declared distributions
thereon, without interest, and no more, before any amount shall be paid or any
assets of the Corporation shall be distributed among the holders of the Common
Stock and, if the assets of the Corporation available for distribution to its
stockholders shall be insufficient to permit the payment in full to the
holders of the Preferred Stock, as aforesaid, then the entire assets of the
Corporation available for distribution to its stockholders shall be
distributed ratably among the holders of the Preferred Stock; then and
thereafter, the remaining assets of the Corporation available for distribution
to its stockholders shall be distributed among and paid to the holders of the
Preferred Stock and the Common Stock, share and share alike and without any
distinction as to class, in proportion to their respective stockholdings.
<PAGE>
A merger of the Corporation with or into any other corporation, a share
exchange involving the Corporation, or a sale, lease, exchange, or transfer of
all or any part of the assets of the Corporation which shall not in fact
result in the liquidation of the Corporation and the distribution of its
assets to its stockholders shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation within
the meaning of this Article SIXTH, paragraph 1.
SECOND: Except as hereinabove provided in paragraph 1 of this Article
SIXTH, the Preferred Stock and the Common Stock of the Corporation shall be
identical in all respects and for all purposes and the holders of the
Preferred Stock and the holders of the Common Stock voting together and
without distinction as to class shall be entitled to one vote per share in all
proceedings in which actions shall be taken by the stockholders of the
Corporation.
THIRD: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
(1) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized.
(2) The Board of Directors of the Corporation may classify or reclassify
any unissued stock by setting or changing in any one or more respects, from
time to time before issuance of such stock, the preferences, conversion or
other rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms or conditions of redemption of such stock.
(3) The Board of Directors shall have power, if authorized by the Bylaws,
to designate by resolution or resolutions adopted by a majority of the whole
Board of Directors, one or more committees, each committee to consist of two
or more of the directors of the Corporation, which, to the extent provided in
said resolutions or in the Bylaws of the Corporation and permitted by the
Colorado Business Corporation Act, shall have and may exercise any or all of
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of the
Corporation to be affixed to all instruments and documents which may require
it.
(4) If the Bylaws so provide, the Board of Directors of the Corporation
shall have power to hold its meetings, to have an office or offices and,
subject to the provisions of the Colorado Business Corporation Act, to keep
the books of the Corporation, outside of said State at such place or places as
may from time to time be designated by it.
<PAGE>
(5) The Board of Directors shall have power to borrow or raise money,
from time to time and without limit, and upon any terms, for any corporate
purposes; and, subject to the Colorado Business Corporation Act, to authorize
the creation, issue, assumption or guaranty of bonds, notes or other evidences
of indebtedness for moneys so borrowed, to include therein such provisions as
to redeemability, convertibility or otherwise, as the Board of Directors, in
its sole discretion, may determine and to secure the payment of principal,
interest or sinking fund in respect thereof by mortgage upon, or the pledge
of, or the conveyance or assignment in trust of, the whole or any part of the
properties, assets and goodwill of the Corporation then owned or thereafter
acquired.
The enumeration and definition of a particular power of the Board of
Directors included in the foregoing shall in no way be limited or restricted
by reference to or inference from the terms of any other clause of this or any
other article of these Articles of Incorporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the laws of the State of Colorado now or
hereafter in force.
FOURTH: Notwithstanding any provision of law to the contrary, the
affirmative vote of a majority of all the votes entitled to be cast on the
matter shall be sufficient, valid and effective, after due authorization,
approval or advice of such action by the Board of Directors, as required by
law, to approve and authorize the following acts of the Corporation:
(i) the amendment of these Articles of Incorporation;
(ii) the merger of the Corporation into another corporation or the merger
of one or more other corporations into the Corporation;
(iii) the sale, lease, exchange or other transfer of all, or
substantially all, of the property and assets of the Corporation, including
its goodwill and franchises;
(iv) the participation by the Corporation in a share exchange (as defined
in the Colorado Business Corporation Act) as the corporation the stock of
which is to be acquired; and
(v) the voluntary or involuntary liquidation, dissolution or winding-up
of or the revocation of any such proceedings relating to the Corporation.
ARTICLE VI
AUTHORIZATION OF SERIES A CONVERTIBLE PREFERRED STOCK
The total number of shares of the capital stock which the Corporation has
authority to issue is one hundred million (100,000,000) shares, divided into
fifty million (50,000,000) shares of common stock with no par value per share
(the "Common Stock"), and fifty million (50,000,000) shares of Series A
Convertible Preferred Stock with a par value of $100 per share (hereinafter
sometimes referred to as the "Series A Convertible Preferred Stock" or the
"Preferred Stock").
<PAGE>
A description of the "Series A Convertible Preferred Stock", including
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications, and terms and conditions for
redemption, all as set by the Board of Directors of the Corporation, is as
follows:
1. Designation and Initial Number. The class of shares of Preferred Stock
hereby classified shall be designated the "Series A Convertible Preferred
Stock." The initial number of authorized shares of the Preferred Stock shall
be fifty million (50,000,000).
2. Distributions. Commencing on January 1, 2001, the holders of the
Preferred Stock shall be entitled to receive, out of funds at the time legally
available for payment of distributions in the State of Colorado, a
non-cumulative distribution at the rate of $1.00 per share per annum, payable
semi-annually in equal installments on the first days of January and July in
each year, if, as and when determined by the Board of Directors, before any
distribution shall be set apart or paid on any other capital stock for such
year.
3. Redemption. The Corporation, at the option of the Board of Directors,
may redeem the whole or any part of the Preferred Stock at any time
outstanding, at any time or from time to time after January 1, 2001, provided
that the Corporation, at any such time, shall have consummated a sale of its
securities pursuant to an effective registration statement (a "Public
Offering") filed with the Securities and Exchange Commission (the "SEC"), upon
at least 30 days' prior written notice to the holders of record of the
Preferred Stock to be redeemed, by paying a redemption price per share equal
to 150% of the par value thereof, plus all accrued and unpaid distributions
declared thereon, at the date fixed for redemption, without interest, in cash,
for each share of Preferred Stock so redeemed. The Board of Directors shall
have full power and authority, subject to the limitations and provisions
herein contained, to prescribe the manner in which and the terms and
conditions upon which the Preferred Stock shall be redeemed at any time and
from time to time. The notice of redemption to each stockholder whose shares
of Preferred Stock are to be redeemed shall specify the number of shares of
Preferred Stock of such stockholder to be redeemed, the date fixed for
redemption and the redemption price at which the shares of Preferred Stock are
to be redeemed, and shall specify where payment of the redemption price is to
be made upon surrender of such shares, shall state the conversion rate then in
effect, and that conversion rights of such shares shall terminate at the
closing of business on the date fixed for redemption. None of the Preferred
Stock acquired by the Corporation by redemption or otherwise shall be reissued
or disposed of but shall, from time to time, be retired in the manner provided
by law.
4. Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, the holders of the issued and outstanding Preferred Stock shall
be entitled to receive for each share of Preferred Stock, before any
distribution of the assets of the Corporation shall be made to the holders of
any other capital stock, a dollar amount equal to the par value thereof plus
all accrued and unpaid distributions declared thereon, without interest. After
such payment shall have been made in full to the holders of the issued and
outstanding Preferred Stock, or funds necessary for such payment shall have
been set aside in trust for the account of the holders of the issued and
outstanding Preferred Stock so as to be and continue to be available therefor,
then, before any further distribution of the assets of the Corporation shall
<PAGE>
be made, a dollar amount equal to that already distributed to the holders of
the Preferred Stock shall be distributed pro-rata to the holders of the other
issued and outstanding capital stock of the Corporation, subject to the rights
of any other class of capital stock set forth in the Articles of Incorporation
of the Corporation or Amendments to the Articles of Incorporation to State
Terms of Series Shares filed by the Corporation. After such payment shall have
been made in full to the holders of such other issued and outstanding capital
stock, or funds necessary for such payment shall have been set aside in trust
for the account of the holders of such other issued and outstanding capital
stock so as to be and continue to be available therefor, the holders of the
issued and outstanding Preferred Stock shall be entitled to participate with
the holders of all other classes of issued and outstanding capital stock in
the final distribution of the remaining assets of the Corporation, and,
<PAGE>
subject to any rights of any other class of capital stock set forth in the
Articles of Incorporation of the Corporation or any Amendments to the Articles
of Incorporation to State Terms of Series Shares filed by the Corporation, the
remaining assets of the Corporation shall be divided and distributed ratably
among the holders of both the Preferred Stock and the other capital stock then
issued and outstanding according to the proportion by which their respective
record ownership of shares of the Preferred Stock and such capital stock bears
to the total number of shares of the Preferred Stock and such capital stock
then issued and outstanding. If, upon such liquidation, dissolution, or
winding up, the assets of the Corporation distributable, as aforesaid, among
the holders of the Preferred Stock shall be insufficient to permit the payment
to them of said amount, the entire assets shall be distributed ratably among
the holders of the Preferred Stock. A consolidation or merger of the
Corporation, a share exchange, a sale, lease, exchange or transfer of all or
substantially all of its assets as an entirety, or any purchase or redemption
of stock of the Corporation of any class, shall not be regarded as a
"liquidation, dissolution, or winding up of the affairs of the Corporation"
within the meaning of this paragraph 4.
5. Conversion Privilege. Preferred Stock shall be convertible into Common
Stock as hereinafter provided and, when so converted, shall be canceled and
retired and shall not be reissued as such:
(A) Any holder of the Preferred Stock may at any time or from time
to time convert such stock into the Common Stock of the Corporation, on
presentation and surrender to the Corporation, of the certificates of the
Preferred Stock to be so converted.
(B) Each holder of Preferred Stock shall have the right to convert
such Preferred Stock on and subject to the following terms and conditions:
(i) The Preferred Stock shall be converted into Common Stock at
the conversion rate, determined as hereinafter provided, in effect at the time
of conversion. Unless such conversion rate shall be adjusted as hereinafter
provided, the conversion rate shall be one share of Common Stock for each
share of Preferred Stock so converted.
(ii) In order to convert Preferred Stock into Common Stock, the
holder thereof shall on any business day surrender at the executive offices of
the Company at 735 Broad Street, Suite 800, Chattanooga, TN 37402 the
certificate or certificates representing such shares, duly endorsed to the
Corporation or in blank, and give written notice to the Corporation at said
office of the number of said shares which such holder elects to convert.
<PAGE>
Preferred Stock shall be deemed to have been converted immediately prior to the
close of business on the day of such surrender for conversion, and the person
or persons entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such Common
Stock at such time. As promptly as practicable on or after the date of any
conversion, the Corporation shall issue and deliver a certificate or
certificates representing the number of shares of Common Stock issuable upon
such conversion, together with cash in lieu of any fraction of a share, as
provided in subparagraph (H) of this paragraph 5, to the person or persons
entitled to receive same. In case of the conversion of only a part of the
shares of any holder of Preferred Stock, the Corporation shall also issue and
deliver to such holder a new certificate of Preferred Stock representing the
number of shares of such Preferred Stock not converted by such holder.
(C) The conversion rate as hereinabove provided shall be subject to
adjustment as follows:
(i) In case the Corporation shall (a) pay a distribution in
shares of its capital stock, (b) subdivide its outstanding shares of Common
Stock into a greater number of shares, (c) combine its outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by reclassification
of its shares of Common Stock any shares of its capital stock, the conversion
rate in effect immediately prior thereto shall be adjusted so that the holder
of a share of Preferred Stock surrendered for conversion after the record date
fixing stockholders to be affected by such event shall be entitled to receive,
upon conversion, the number of shares of Common Stock which such holder would
have owned or have been entitled to receive after the happening of such event
had such share of Preferred Stock been converted immediately prior to the
record date in the case of such dividend or the effective date in the case of
any such subdivision, combination or reclassification. An adjustment made pursua
nt to this subparagraph 5(C)(i) shall be made whenever any of such events
shall happen, but shall become effective retroactively after such record date
or such effective date, as the case may be, as to shares of Preferred Stock
converted between such record date or effective date and the date of happening
of any such event.
(ii) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share, which, when added to the amount
of consideration received or receivable by the Corporation for such right or
warrant, is less than the current market price (as hereinafter defined) per
share of Common Stock at the record date mentioned below, the conversion rate
shall be adjusted so that thereafter, until further adjusted, each share of
Preferred Stock shall be convertible into that number of shares of Common
Stock determined by multiplying the number of shares of Common Stock into
which such share of Preferred Stock was theretofore convertible by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock issuable upon the exercise of such rights
or warrants, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants
<PAGE>
plus the number of shares which an amount equal to the sum of (a) the
aggregate exercise price of the total number of shares of Common Stock
issuable upon the exercise of such rights or warrants, plus (b) the aggregate
amount of consideration, if any, received, or receivable by the Corporation
for any such rights or warrants, would purchase at such current market price.
Such adjustment shall be made whenever such rights or warrants are issued, but
shall also be effective retroactively as to shares of Preferred Stock
converted between the record date for the determination of stockholders
entitled to receive such rights or warrants and the date such rights or
warrants are exercised.
(iii) In case the Corporation shall distribute to all holders
of its Common Stock any one or more of the following: (a) evidence of its
indebtedness, (b) assets (excluding cash distributions, distributions made out
of current or retained earnings and distributions of the stock of any
subsidiary), or (c) rights or warrants to subscribe for or purchase securities
issued by, or property of, the Corporation (excluding those referred to in
subparagraph 5(C)(ii) above), then in each such case the conversion rate shall
be adjusted as provided below so that thereafter, until further adjusted, the
number of shares of Common Stock into which each share of Preferred Stock
shall be convertible shall be determined by multiplying the number of shares
of Common Stock into which such share of Preferred Stock was theretofore
convertible by a fraction, the numerator of which shall be the current market
price per share of Common Stock on the date of such distribution, and the
denominator of which shall be such current market price per share of the
Common Stock, less the then fair market value (as determined by the Board of
Directors of the Corporation, whose determination shall be conclusive) of the
portion of the assets or evidence of indebtedness so distributed or of such
rights or warrants applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made, but shall
also be effective retroactively as to shares of Preferred Stock converted
between the record date for the determination of stockholders entitled to
receive such distribution and the date such distribution is made.
(iv) For the purpose of any computation under subparagraphs
5(C)(ii) and (iii) above, the current market price per share of Common Stock
at any date shall be (a) if the Common Stock is listed on any national
securities exchange, the average of the daily closing prices for the 15
consecutive business days commencing 20 business days before the day in
question (the "Trading Period"); (b) if the Common Stock is not listed on any
national securities exchange but is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the average of
the high and low bids as reported on NASDAQ for the Trading Period; and (c) if
the Common Stock is neither listed on any national securities exchange nor
quoted on NASDAQ, the higher of (x) the conversion price then in effect, or
(y) the tangible book value per share as of the end of the Corporation's
immediately preceding fiscal year.
(v) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such rate; provided, however, that any adjustments which by reason of this
subparagraph 5(C)(v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
subparagraph 5(C) shall be made to the nearest one-hundredth of a share.
(D) No adjustment of the conversion rate shall be made in any of the
following cases:
(i) upon the grant or exercise of stock options hereafter
granted, or under any employee stock option plan now or hereafter authorized,
to the extent that the aggregate of the number of shares which may be
purchased under such options and the number of shares issued under such
<PAGE>
employee stock purchase plan is less than or equal to ten percent (10%) of the
number of shares of Common Stock outstanding on January 1 of the year of the
grant or exercise;
(ii) shares of Common Stock issued upon the conversion of
Preferred Stock;
(iii) shares issued in connection with the acquisition by the
Corporation or by any subsidiary of the Corporation of 80% or more of the
assets of another corporation, and shares issued in connection with the
acquisition by the Corporation or by any subsidiary of the Corporation of 80%
or more of the voting shares of another corporation (including shares issued
in connection with such acquisition of voting shares of such other corporation
subsequent to the acquisition of an aggregate of 80% of such voting shares),
shares issued in a merger of the Corporation or a subsidiary of the
Corporation with another corporation in which the Corporation or the
Corporation's subsidiary is the surviving corporation, and shares issued upon
the conversion of other securities issued in connection with any such
acquisition or in any such merger;
(iv) shares issued by way of dividend or other distribution on
Common Stock excluded from the calculation of the adjustment under this
subparagraph 5(D) or on Common Stock resulting from any subdivision or
combination of Common Stock so excluded; or
(v) shares issued pursuant to all stock options and warrants
outstanding on the date of the filing of these Articles.
(E) Whenever the conversion rate is adjusted as herein provided, the
Corporation shall prepare a certificate signed by the Treasurer of the
Corporation setting forth the adjusted conversion rate and showing in
reasonable detail the facts upon which such adjustment is based. As promptly
as practicable, the Corporation shall cause a copy of the certificate referred
to in this subparagraph 5(E) to be mailed to each holder of record of issued
and outstanding Preferred Stock at the address of such holder appearing on the
Corporation's books.
(F) The Corporation shall pay all taxes that may be payable in
respect of the issue or delivery of Common Stock on conversion of Preferred
Stock pursuant hereto, but shall not pay any tax which may be payable with
respect to income or gains of the holder of any Preferred Stock or Common
Stock or any tax which may be payable in respect of any transfer involved in
the issue and delivery of the Common Stock in a name other than that in which
the Preferred Stock so converted was registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to
the Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(G) Upon conversion of any shares of Preferred Stock, the holders of
the shares of Preferred Stock so converted shall not be entitled to receive
any distributions declared with respect to such shares of Preferred Stock
unless such distributions shall have been declared by the Board of Directors
and the record date for such distributions shall have been on or before the
date such shares shall have been converted. No payment or adjustment shall be
made on account of distributions declared and payable to holders of Common
Stock of record on a date prior to the date of conversion.
<PAGE>
(H) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Preferred Stock. If more
than one share of Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of such shares
so surrendered. If the conversion of any share of Preferred Stock results in a
fraction, an amount equal to such fraction multiplied by the current market
price (determined as provided in subparagraph 5(C)(iv) above) of the Common
Stock on the day of conversion shall be paid to such holder in cash by the
Corporation.
(I) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized Common Stock, for the
purpose of effecting the conversion of the issued and outstanding Preferred
Stock, the full number of shares of Common Stock then deliverable in the event
and upon the conversion of all of the Preferred Stock then issued and
outstanding.
6. Voting Rights. Except as otherwise provided in this paragraph 6, each
share of Preferred Stock is entitled to one vote, voting together with the
holders of shares of Common Stock and not as a class, on each matter submitted
to a vote at a meeting of stockholders of the Corporation. In the event that
at any time two consecutive semi-annual distributions payable on the Preferred
Stock shall be in default (a "Two Dividend Default"), then immediately upon
the happening of a Two Dividend Default and until the Two Dividend Default and
all defaults in the payment of semi-annual distributions subsequent to the Two
Dividend Default shall be cured, the holders of Preferred Stock shall have the
right, voting separately as a class, to elect one-third of the Directors of
the Corporation. In the event that at any time four consecutive semi-annual
distributions payable on the Preferred Stock shall be in default (a "Four
Dividend Default"), then immediately upon the happening of such Four Dividend
Default and until such Four Dividend Default and all defaults in the payment
of semi-annual distributions subsequent to the Four Dividend Default shall be
cured, the holders of Preferred Stock shall have the right, voting separately
as a class, to elect a majority of the Directors of the Corporation. The
foregoing voting rights are hereinafter collectively referred to as the
"Special Voting Rights." The Special Voting Rights shall be exercised only at
annual meetings of the stockholders of the Corporation, and only if the
holders of a majority of the outstanding shares of Preferred Stock entitled to
such Special Voting Rights are present in person or by proxy. Notwithstanding
the foregoing provisions of this paragraph 6, upon payment in full of all
defaults in the payment of semi-annual distributions subsequent to a Four
Dividend Default and of the distribution which resulted in the Four Dividend
Default, so that no more than three consecutive semi-annual distributions
remain in default, the Special Voting Rights of the holders of Preferred Stock
shall be reduced so that they shall have the right, voting separately as a
class, to elect one-third of the Directors of the Corporation. Notwithstanding
the foregoing provisions of this Paragraph 6, upon payment in full of (i) all
defaults in the payment of semi-annual distributions subsequent to a Two
Dividend Default and of the distribution which resulted in the Two Dividend
Default, or (ii) upon payment in full of all semi-annual distributions
subsequent to a Four Dividend Default and three of the distributions which
resulted in a Four Dividend Default, so that, in each such case, no more than
one semi-annual distribution remains in default, the Special Voting Rights
shall terminate, and the voting power in the election of Directors shall again
be vested equally in the holders of the Preferred Stock and the Common Stock,
who shall each be entitled to one vote per share. Each Director elected by the
holders of shares of Preferred Stock as a result of the Special Voting Rights
<PAGE>
set forth above shall serve only until the next annual meeting of
stockholders, or until the date the Special Voting Rights shall have
terminated as provided in this paragraph 6, whichever event first occurs.
7. Registration Rights.
(A) "Piggy-Back" Registration Rights:
(i) If, at any time and from time to time after the
Corporation's first Public Offering, the Corporation proposes to register any
of its securities on Forms S-1, S-2, S-3, SB-1 or SB-2, or any successor
forms, under the Securities Act of 1933 (the "Act") and applicable state
securities laws (the "State Acts"), the Corporation shall give prompt written
notice to each holder of Preferred Stock (or Common Stock into which it has
been converted) of its intention to do so, and, upon the written request of
any such stockholder made within 30 days after the receipt of any such notice,
which written request shall specify the number of shares such stockholder
desires to be registered, the Corporation shall use its reasonable efforts to
cause all such shares of such stockholder to be registered under the Act and
State Acts to permit the sale of such shares. Notwithstanding anything
contained herein to the contrary, the Corporation shall have the right to
discontinue any registration of such shares of such stockholder at any time
prior to the effective date of such registration if the registration of other
securities giving rise to such registration is discontinued.
(ii) If any stockholder shall request inclusion of any shares
held by such stockholder in the registration of other securities of the
Corporation and such proposed registration by the Corporation is, in whole or
in part, an underwritten Public Offering, and if the managing underwriter
determines and advises the Corporation in writing that inclusion in such
registration of all proposed securities (including securities being offered by
or on behalf of the Corporation and securities covered by requests for
registration) would adversely affect the marketability of the offering of the
securities proposed to be registered by the Corporation, then such stockholder
shall be entitled to participate pro-rata with the other stockholders having
similar incidental registration rights with respect to such registration to
the extent the managing underwriter determines that such shares may be
included without such adverse effect.
(iii) The rights of such stockholders to have their shares
included in such registration shall expire on the first to occur of January 1,
2010, or that date which is 10 years after the Corporation's first Public
Offering.
(B) Demand Registration Rights: At any time after the Corporation's
first Public Offering of its stock, the Corporation shall, upon receipt of a
written request from the holders of at least 25% of the aggregate issued and
outstanding Preferred Stock and the Common Stock into which it has been
converted, prepare and file under the Act a registration statement in respect
of such shares. In the event that not all of such shares have been registered
as herein set forth, the Corporation shall, upon receipt of a written request
from the holders of at least 25% of the aggregate remaining unregistered
Preferred Stock and the Common Stock into which it has been converted, prepare
and file under the Act no more than one additional registration statement to
register the remaining balance of the shares not so registered.
<PAGE>
(C) Expenses: The Corporation shall pay all expenses incident to its
performance of or compliance with the provisions of subparagraphs 7(A) and
7(B) hereof, including, without limitation, all registration and filing fees,
fees and expenses of compliance with the Act and State Acts, printing
expenses, messenger and delivery expenses, fees and disbursements of counsel
for the Corporation (but not the legal fees of any such stockholder) and all
independent public accountants and other persons retained by the Corporation,
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (excluding underwriting commissions and discounts).
(D) Obligations of the Corporation: If and whenever the Corporation
is required to use its reasonable efforts to effect or cause the registration
of any shares under the Act as provided in this paragraph 7, the Corporation
shall, as expeditiously as possible:
(i) prepare and file with the SEC a registration statement with
respect to such shares and use its reasonable efforts to cause such
registration statement to become effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and such prospectus current for a period not in excess of nine
months as may be necessary in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of such shares such number of
copies of such registration statement and each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus), in conformity with the requirements of the Act, and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the shares owned by such seller;
(iv) use its reasonable efforts to register or qualify such
shares covered by such registration statement under such State Acts as each
seller reasonably requests, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the shares owned by such seller, except
that the Corporation shall not for any such purpose be required to qualify to
do business as a foreign corporation in any jurisdiction wherein it is not so
qualified, to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction; and
(v) notify each seller of any such securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Act or upon the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller prepare and furnish to such
<PAGE>
seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
(E) Indemnification and Notification:
(i) The Corporation shall indemnify and hold harmless each
holder of any shares included in the Corporation's registration statement
pursuant to this paragraph 7, and each person, if any, who controls such
holder within the meaning of Section 15 of the Act, from and against any and
all losses, claims, damages, expenses and liabilities (including reasonable
attorneys' fees) caused by any untrue statement of a material fact contained
in any such registration statement, or contained in a prospectus furnished
thereunder, or in any amendment or supplement thereto or caused by any
omission to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading (provided, however, that the foregoing
indemnification and agreement to hold harmless shall not apply insofar as such
losses, claims, damages, expenses, and liabilities are caused by any such
untrue statement or omission is based upon information furnished in writing to
the Corporation by any such holder expressly for use in any registration
statement or prospectus).
(ii) Promptly after receipt by any holder of any shares
included in the Corporation's registration statement pursuant to this
paragraph 7 of notice of the commencement of any action, said holder shall, if
a claim in respect thereof is to be made against the Corporation under this
paragraph 7, notify the Corporation in writing of the commencement thereof,
but the omission so to notify the Corporation shall not relieve it from any
liability which it may have to them under this paragraph 7. In case any such
action is brought against any holder of any shares registered pursuant to this
paragraph 7 and the Corporation is notified of the commencement thereof as
provided herein, the Corporation shall be entitled to participate in, and, to
the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such holder, and after notice from the Corporation
to such holder of the Corporation's election so to assume the defense thereof,
the Corporation shall not be liable under this paragraph 7 for any legal or
other expense subsequently incurred by such holder in connection with the
defense thereof other than reasonable costs of investigation.
(iii) Each holder of any shares registered pursuant to this
paragraph 7 agrees to cooperate fully with the Corporation in effecting
registration and qualification of the Preferred Stock (or the Common Stock
into which it has been converted) and of such distribution, and shall
indemnify and hold harmless the Corporation and each person who may control
the Corporation within the meaning of Section 15 of the Act, each director of
the Corporation, and each officer who signed any registration statement from
and against any and all losses, claims, damages, expenses, and liabilities
(including reasonable attorneys' fees) caused by any untrue statement of a
material fact contained in any such registration statement, or contained in a
prospectus furnished thereunder, or any amendment or supplement thereto, or
caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the extent that
<PAGE>
such untrue statement or omission was made in reliance upon information
furnished to the Corporation by any such holder for inclusion therein.
8. Changes In Terms of Preferred Stock. The terms of the Preferred Stock
may not be amended, altered or repealed, and no class of capital stock or
securities convertible into capital stock shall be authorized which has
superior rights to the Preferred Stock as to distributions, liquidation or
vote, without the consent of the holders of at least two-thirds of the
outstanding shares of Preferred Stock.
9. No Implied Limitations. Except as otherwise provided by express
provisions of these Articles of Incorporation, nothing herein shall limit, by
inference or otherwise, the discretionary right of the Board of Directors to
classify and reclassify and issue any shares of Preferred Stock and to fix or
alter all terms thereof to the full extent provided in the Articles of
Incorporation of the Corporation.
10. General Provisions. In addition to the above provisions with respect
to the Preferred Stock, such Preferred Stock shall be subject to, and entitled
to the benefits Of, the provisions set forth in the Corporation's Articles of
Incorporation with respect to Preferred Stock generally.
11. Notices. All notices required or permitted to be given by the
Corporation with respect to the Preferred Stock shall be in writing, and if
delivered by first class United States mail, postage prepaid, to the holders
of the Preferred Stock at their last addresses as they shall appear upon the
books of the Corporation, shall be conclusively presumed to have been duly
given, whether or not the stockholder actually receives such notice; provided,
however, that failure to duly give such notice by mail, or any defect in such
notice, to the holders of any stock designated for redemption, shall not
affect the validity of the proceedings for the redemption of any other shares
of Preferred Stock.
ARTICLE VII
SPECIAL PROVISIONS WHEN TWO CLASSES OF COMMON STOCK ARE
AUTHORIZED IN THE ARTICLES OF INCORPORATION
Election and Filling of Vacancies. With respect to the election of the
Board of Directors of the Corporation:
(1) the holders of Class A Common Stock (a) shall nominate and elect one
(1) director who shall be known as the Class A Director, and (b) in the event
of the death, disability, removal, resignation or refusal to act of the Class
A Director, the holders of Class A Common Stock, to the exclusion of the
holders of all other classes of stock of the Corporation, shall nominate and
elect a director to fill the vacancy so created by such death, disability,
removal, resignation or refusal to act; and
(2) the holders of Class B Common Stock (a) shall nominate and elect two
(2) directors who shall be known as the Class B Directors, and (b) in the
event of the death, disability, removal, resignation or refusal to act of any
or all of the Class B Directors, the holders of the Class B Common Stock, to
the exclusion of the holders of all other classes of stock of the Corporation,
shall nominate and elect one or more directors to fill the vacancy or
vacancies so created by such death, disability, removal, resignation or
refusal to act.
ARTICLE VIII
HIGH QUORUM PROTECTIVE PROVISIONS
Quorum. The presence in person or by proxy of the holders of record of
all of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote thereat shall constitute a quorum at all
meetings of the stockholders, except as otherwise provided by the Colorado
Business Corporation Act, by the Articles of Incorporation or by these Bylaws.
If less than a quorum shall be in attendance at the time for which the meeting
shall have been called, the meeting may be adjourned from time to time by a
majority vote of the stockholders present or represented, without any notice
other than by announcement at the meeting, until a quorum shall attend. At any
adjourned meeting at which a quorum shall attend, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
<PAGE>
ARTICLE IX
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
or preferential right to purchase, subscribe for, or otherwise acquire any
unissued or treasury shares of stock of the corporation, or any options or
warrants to purchase, subscribe for or otherwise acquire any such unissued or
treasury shares, or any shares, bonds, notes, debentures, or other securities
convertible into or carrying options or warrants to purchase, subscribe for or
otherwise acquire any such unissued or treasury shares.
<PAGE>
ARTICLE X
CUMULATIVE VOTING
The shareholders shall not be entitled to cumulative voting.
ARTICLE XI
SHARE TRANSFER RESTRICTIONS
The corporation shall have the right to impose restrictions upon the
transfer of any of its authorized shares or any interest therein. The board
of directors is hereby authorized on behalf of the corporation to exercise the
corporation's right to so impose such restrictions.
ARTICLE XII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation shall be
17 West Cheyenne Mountain Boulevard, Colorado Springs, CO 80906, and the name
of the initial registered agent at such address is Mark T. Thatcher, Esq.
Either the registered office or the registered agent may be changed in the
manner provided by law.
THE UNDERSIGNED CONSENTS TO THE APPOINTMENT AS THE
INITIAL REGISTERED AGENT
______________________________
REGISTERED AGENT
<PAGE>
ARTICLE XIII
BOARD OF DIRECTORS
The board of directors of the corporation shall consist of no more than
nine (9) directors, and the names and addresses of the persons who are serving
as directors until their successors are elected and shall qualify are as
follows:
Name Title Address
Richard Nadeau, Jr. 1250 Turks Head Building
Providence, RI 02903
James R. Simmons 1250 Turks Head Building
Providence, RI 02903
Scott Adams 1250 Turks Head Building
Providence, RI 02903
Kevin Gillis 1250 Turks Head Building
Providence, RI 02903
The number of directors shall be fixed in accordance with the bylaws.
ARTICLE XIV
INDEMNIFICATION
The corporation may:
(A) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee, fiduciary or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorney fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit,
or proceeding, if he acted in good faith and in a manner he reasonably
believed to be in the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo contendere
or its equivalent shall not of itself create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
the best interests of the corporation and, with respect to any criminal action
or proceeding, had reasonable cause to believe his conduct was unlawful.
<PAGE>
(B) The corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in the best
interests of the corporation; but no indemnification shall be made in respect
of any claim, issue, or matter as to which such person has been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action
or suit was brought determines upon application that, despite the adjudication
of liability, but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses which such
court deems proper.
(C) To the extent that a director, officer, employee, fiduciary or
agent of a corporation has been successful on the merits in defense of any
action, suit, or proceeding referred to in (A) or (B) of this Article XI or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorney fees) actually and reasonably incurred by
him in connection therewith.
(D) Any indemnification under (A) or (B) of this Article XI (unless
ordered by a court) and as distinguished from (C) of this Article shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee,
fiduciary or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in (A) or (B) above. Such
determination shall be made by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit, or
proceeding, or, if such a quorum is not obtainable or, even if obtainable, if
a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or by the shareholders.
(E) Expenses (including attorney fees) incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding as authorized in
(C) or (D) of this Article XI upon receipt of an undertaking by or on behalf
of the director, officer, employee, fiduciary or agent to repay such amount
unless it is ultimately determined that he is entitled to be indemnified by
the corporation as authorized in this Article XI.
(F) The indemnification provided by this Article XI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, and any procedure provided for by any of the foregoing, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee, fiduciary or agent and shall inure to the benefit
of heirs, executors, and administrators of such a person.
(G) The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, fiduciary or agent of
the corporation or who is or was serving at the request of the corporation as
a director, officer, employee, fiduciary or agent of another corporation,
<PAGE>
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under provisions of this Article XI.
ARTICLE XV
TRANSACTIONS WITH INTERESTED DIRECTORS
No contract or other transaction between the corporation and one (1) or
more of its directors or any other corporation, firm, association, or entity
in which one (1) or more of its directors are directors or officers or are
financially interested shall be either void or voidable solely because of such
relationship or interest, or solely because such directors are present at the
meeting of the board of directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction, or solely because their
votes are counted for such purpose if:
(A) The fact of such relationship or interest is disclosed or known to
the board of directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors;
(B) The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or
(C) The contract or transaction is fair and reasonable to the
corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or a committee
thereof which authorizes, approves, or ratifies such contract or
transaction.
ARTICLE XVI
VOTING OF SHAREHOLDERS
If a quorum is present, the affirmative vote of a majority of the
outstanding shares represented at the meeting and entitled to vote thereon, or
of any class or series, shall be the act of the shareholders.
<PAGE>
ARTICLE XVII
INCORPORATOR
The name and address of the incorporator is as follows:
Name Address
Mark T. Thatcher 17 W. Cheyenne Mtn. Blvd.
Colorado Springs, CO 80906
IN WITNESS WHEREOF, the above named incorporator signed these Articles of
Incorporation on January 11, 2000.
/s/ Mark T. Thatcher
______________________________
MARK T. THATCHER,
Incorporator
STATE OF RHODE ISLAND )
: ss
COUNTY OF )
I, the undersigned, a notary public, hereby certify that on January 11, 2000,
the above named incorporator personally appeared before me and being by me
first duly sworn declared that he is the person who signed the foregoing
document as incorporator, and that the statements therein contained are true.
WITNESS my hand and official seal.
______________________________
Notary Public
Address:
(Seal) My Commission Expires:
BYLAWS
OF
NORTHBOROUGH HOLDINGS, INC.
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL OFFICE. The principal office of the corporation in
the State of Colorado shall be located in the City of Colorado Springs, County
of El Paso. The corporation may have such other offices, either within or
outside of the State of Colorado, as the Board of Directors may designate, or
as the business of the corporation may require from time to time.
Section 1.2 REGISTERED OFFICE. The registered office of the corporation,
required by the Colorado Business Corporation Act to be maintained in the
State of Colorado, may be, but need not be, identical with the principal
office in the State of Colorado, and the address of the registered office may
be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 2.1 ANNUAL MEETING. The annual meeting of the shareholders shall
be held on the last Tuesday of March in each year, commencing with the year
2000, at the hour of 10:00 A.M., or at such other time on such other day as
shall be fixed by the Board of Directors, for the purpose of electing
directors and for the transaction of such other business as may come before
the meeting. If the day fixed for the annual meeting shall be a legal holiday
in the State of Maine, such meeting shall be held on the next succeeding
business day. If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of the shareholders as soon thereafter as may be
convenient.
<PAGE>
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call or of proper demand for a
special meeting and notice of the special meeting was not given within thirty
days after the date of the call or the date the last of the demands necessary
to require calling of the meeting was received by the corporation pursuant to
C.R.S. § 7-107-102(1)(b), or the special meeting was not held in
accordance with the notice.
Section 2.2 SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President upon the receipt of one or more written demands for a special
meeting, stating the purpose or purposes for which it is to be held, signed
and dated by the holders of shares representing at least ten percent of all
the votes entitled to be cast on any issue proposed to be considered at the
meeting.
Section 2.3 PLACE OF MEETINGS. The Board of Directors may designate any
place, either within or outside of the State of Colorado, as the place of
meeting for any annual meeting or for any special meeting called by the Board
of Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation
in the State of Colorado.
Section 2.4 NOTICE OF MEETING. Written notice stating the place, day and
hour of the meeting of shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall, unless otherwise
prescribed by statute, be delivered not less than ten nor more than sixty days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the officer or other persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting; provided, however, that if the number of authorized shares is to be
increased, at least thirty days' notice shall be given.
Notice of a special meeting shall include a description of the purpose or
purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity
which this corporation controls, in each case with or without the goodwill,
(iv) a dissolution of the corporation, or (v) any other purpose for which a
statement of purpose is required by the Colorado Business Corporation Act.
<PAGE>
Notice shall be given personally or by mail, private carrier, telegraph,
teletype, electronically transmitted facsimile or other form of wire or
wireless communication by or at the direction of the president, the secretary,
or the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed and if in a comprehensible form,
such notice shall be deemed to be given and effective when deposited in the
United States mail, addressed to the shareholder at his address as it appears
in the corporation's current record of shareholders, with postage prepaid. If
notice is given other than by mail, and provided that such notice is in a
comprehensible form, the notice is given and effective on the date received by
the shareholder.
If requested by the person or persons lawfully calling such meeting, the
notice shall be given at corporate expense.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for
the adjourned meeting, a new notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting as of the new
record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver shall
be delivered to the corporation for filing with the corporate records.
Further, by attending a meeting either in person or by proxy, a shareholder
waives objection to lack of notice or defective notice of the meeting unless
the shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of
notice or defective notice. By attending the meeting, the shareholder also
waives any objection to consideration in the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
No notice need be sent to any shareholder if three successive notices
mailed to the last known address of such shareholder have been returned as
undeliverable until such time as another address for such shareholder is made
known to the corporation by such shareholder. In order to be entitled to
receive notice of any meeting, a shareholder shall advise the corporation in
writing of any change in such shareholder's mailing address as shown on the
corporation's books and records.
Section 2.5 MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall
meet at any time and place, either within or outside of the State of Colorado,
and consent to the holding of a meeting at such time and place, such meeting
shall be valid without call or notice, and at such meeting any corporate
action may be taken.
Section 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any distribution, or in order to make a determination of
shareholders for any other purpose, the Board of Directors of the corporation
<PAGE>
may provide that the share transfer books shall be closed for a stated period
but not to exceed, in any case, seventy days. If the share transfer books
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for at
least ten days immediately preceding such meeting. In lieu of closing the
share transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case
to be not more than seventy days and, in case of a meeting of shareholders,
not less than ten days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If the share
transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a distribution,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such distribution is adopted,
as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof unless the meeting is
adjourned to a date more than one hundred twenty days after the date fixed for
the original meeting, in which case the Board of Directors shall make a new
determination as provided in this section.
Section 2.7 VOTING RECORD. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten
days before such meeting of shareholders, a complete record of the
shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged by voting groups and within each voting group by
class or series of shares, in alphabetical order within each class or series,
with the address of and the number of shares held by each shareholder in each
class or series. For a period beginning the earlier of ten days before the
meeting for which the record was prepared or two business days after notice of
the meeting is given and continuing through the meeting, the record shall be
kept on file at the principal office of the corporation or at a place
identified in the notice of the meeting in the city where the meeting will be
held, whether within or outside of the State of Colorado, and shall be subject
to inspection by any shareholder upon written demand at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as to
who are the shareholders entitled to examine the record or transfer books or
to vote at any meeting of shareholders.
Section 2.8 QUORUM. A majority of the votes entitled to be cast on the
matter by a voting group, represented in person or by proxy, constitutes a
quorum of that voting group for action on that matter. If no specific voting
group is designated in the Articles of Incorporation or under the Colorado
Business Corporation Act for a particular matter, all outstanding shares of
the corporation entitled to vote, represented in person or by proxy, shall
constitute a voting group. In the absence of a quorum at any such meeting, a
majority of the shares so represented may adjourn the meeting from time to
time for a period not to exceed one hundred twenty days without further
notice. However, if the adjournment is for more than one hundred twenty days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record entitled to vote at the meeting.
<PAGE>
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal during such meeting of that number of
shareholders whose absence would cause there to be less than a quorum.
Section 2.9 MANNER OF ACTING. If a quorum is present, an action is
approved if the votes cast favoring the action exceed the votes cast within
the voting group opposing the action and such action shall be the act of the
shareholders, unless the vote of a greater proportion or number or voting by
groups is otherwise required by the Colorado Business Corporation Act, the
Articles of Incorporation or these Bylaws.
Section 2.10 PROXIES. At all meetings of shareholders a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his or her duly authorized attorney-in-fact. A shareholder
may also appoint a proxy by transmitting or authorizing the transmission of a
telegram, teletype, or other electronic transmission providing a written
statement of the appointment to the proxy, a proxy solicitor, proxy support
service organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from which
it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar writing
shall be filed with the secretary of the corporation before or at the time of
the meeting. The appointment of a proxy is effective when received by the
corporation and is valid for eleven months unless a different period is
expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could
be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his or her authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his or her authority under the appointment.
Other notice of revocation may, in the discretion of the corporation, be
deemed to include the appearance at a shareholders' meeting of the shareholder
who granted the proxy and his or her voting in person on any matter subject to
a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
or her authority under the appointment.
<PAGE>
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by
the shareholder (including a shareholder who is a successor to the shareholder
who granted the proxy) either personally or by his or her attorney-in-fact,
notwithstanding that the revocation may be a breach of an obligation of the
shareholder to another person not to revoke the appointment.
Section 2.11 VOTING OF SHARES. Unless otherwise provided by these Bylaws
or the Articles of Incorporation, each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders, and each fractional share shall be entitled to a
corresponding fractional vote on each such matter. Only shares are entitled to
vote.
Section 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS. If the name on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and
to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be that
of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment or
proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to
the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner
or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign
for the shareholder has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or fiduciaries
and the name signed purports to be the name of at least one of the co-tenants
or fiduciaries, and the person signing appears to be acting on behalf of all
the co-tenants or fiduciaries; or
<PAGE>
(vi) the acceptance of the vote, consent, waiver, proxy appointment or
proxy appointment revocation is otherwise proper under rules established by
the corporation that are not inconsistent with this Section 2.12.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
Neither the corporation nor any of its directors, officers employees, or
agents who accepts or rejects a vote, consent, waiver, proxy appointment or
proxy appointment revocation in good faith and in accordance with the
standards of this Section is liable in damages for the consequences of the
acceptance or rejection.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders of the redemption price on surrender
of the shares.
Section 2.13 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Unless the
Articles of Incorporation or these Bylaws provide otherwise, action required
or permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is evidenced by one or more written consents describing
the action taken, signed by each shareholder entitled to vote and delivered to
the Secretary of the corporation for inclusion in the minutes or for filing
with the corporate records. Action taken under this section is effective when
all shareholders entitled to vote have signed the consent, unless the consent
specifies a different effective date.
Any such writing may be received by the corporation by electronically
transmitted facsimile or other form of wire or wireless communication
providing the corporation with a complete copy thereof, including a copy of
the signature thereto. The shareholder so transmitting such a writing shall
furnish an original of such writing to the corporation, but the failure of the
corporation to receive or record such original writing shall not affect the
action so taken.
The record date for determining shareholders entitled to take action
without a meeting shall be the date the written consent is first received by
the corporation.
Section 2.14 VOTING BY BALLOT. Voting on any question or in any election
may be by voice vote unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
Section 2.15 NO CUMULATIVE VOTING. No shareholder shall be permitted to
cumulate his or her votes.
<PAGE>
Section 2.16 WAIVER OF NOTICE. When any notice is required to be given to
any shareholder, a waiver thereof in writing signed by the person entitled to
such notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
The attendance of a shareholder at any meeting shall constitute a waiver
of notice, waiver of objection to defective notice of such meeting, or a
waiver of objection to the consideration of a particular matter at the
shareholder meeting unless the shareholder, at the beginning of the meeting,
objects to the holding of the meeting, the transaction of business at the
meeting, or the consideration of a particular matter at the time it is
presented at the meeting.
Section 2.17 PARTICIPATION BY ELECTRONIC MEANS. Any shareholder may
participate in any meeting of the shareholders by means of telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 GENERAL POWERS. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 3.2 PERFORMANCE OF DUTIES. A director of the corporation shall
perform his or her duties as a director, including his or her duties as a
member of any committee of the board upon which he or she may serve, in good
faith, in a manner he or she reasonably believes to be in the best interests
of the corporation, and with such care as an ordinarily prudent person in a
like position would use under similar circumstances. In performing his duties,
a director shall be entitled to rely on information, opinions, reports, or
statements, including financial statements and other financial data, in each
case prepared or presented by persons and groups listed in paragraphs (a),
(b), and (c) of this Section 3.2; but he or she shall not be considered to be
acting in good faith if he or she has knowledge concerning the matter in
question that would cause such reliance to be unwarranted. A person who so
performs his or her other duties shall not have any liability by reason of
being or having been a director of the corporation. Those persons and groups
on whose information, opinions, reports, and statements a director is entitled
to rely are:
(a) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to matters
which the director reasonably believes to be within such persons' professional
or expert competence; or
(c) A committee of the board upon which he or she does not serve, duly
designated in accordance with the provision of the Articles of Incorporation
or the Bylaws, as to matters within its designated authority, which committee
the director reasonably believes to merit confidence.
<PAGE>
Section 3.3 NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the corporation shall be fixed from time to time by resolution of the Board
of Directors, but in no instance shall there be less than one director. Each
director shall hold office as prescribed by written agreement, or until the
next annual meeting of shareholders, or until his or her successor shall have
been elected and qualified. Directors need not be residents of the State of
Colorado or shareholders of the corporation.
There shall be a Chairman of the Board, who has been elected from among
the directors. He or she shall preside at all meetings of the stockholders and
of the Board of Directors. He or she shall have such other powers and duties
as may be prescribed by the Board of Directors.
There shall be at least two (2) independent directors as defined by the
Colorado Business Corporation Act of 1994, as amended.
Section 3.4 REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Colorado, for the holding of additional regular meetings without
other notice than such resolution.
Section 3.5 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of Colorado,
as the place for holding any special meeting of the Board of Directors called
by them.
Section 3.6 NOTICE. Written notice of any special meeting of directors
shall be given as follows:
By mail to each director at his or her business address at least two days
prior to the meeting; or
By personal delivery, facsimile or telegram at least twenty-four hours
prior to the meeting to the business address of each director, or in the event
such notice is given on a Saturday, Sunday or holiday, to the residence
address of each director. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, so addressed, with postage
thereon prepaid. If notice is given by facsimile, such notice shall be deemed
to be delivered when a confirmation of the transmission of the facsimile has
been received by the sender. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph
company.
Any director may waive notice of any meeting.
The attendance of a director at any meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
<PAGE>
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice
or waiver of notice of such meeting.
When any notice is required to be given to a director, a waiver thereof
in writing signed by such director, whether before, at or after the time
stated therein, shall constitute the giving of such notice.
Section 3.7 QUORUM. A majority of the number of directors fixed by or
pursuant to Section 3.2 of this Article III, or if no such number is fixed, a
majority of the number of directors in office immediately before the meeting
begins, shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
Section 3.8 MANNER OF ACTING. Except as otherwise required by law or by
the Articles of Incorporation, the affirmative vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
Section 3.9 INFORMAL ACTION BY DIRECTORS OR COMMITTEE MEMBERS. Unless
the
Articles of Incorporation or these By-laws provide otherwise, any action
required or permitted to be taken at a meeting of the board of directors or
any committee designated by said board may be taken without a meeting if the
action is evidenced by one or more written consents describing the action
taken, signed by each director or committee member, and delivered to the
Secretary for inclusion in the minutes or for filing with the corporate
records. Action taken under this section is effective when all directors or
committee members have signed the consent, unless the consent specifies a
different effective date. Such consent has the same force and effect as a
unanimous vote of the directors or committee members and may be stated as such
in any document.
Section 3.10 PARTICIPATION BY ELECTRONIC MEANS. Any members of the Board
of Directors or any committee designated by such Board may participate in a
meeting of the Board of Directors or committee by means of telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
Section 3.11 VACANCIES. Any vacancy on the Board of Directors may be
filled by the affirmative vote of a majority of the shareholders or the Board
of Directors. If the directors remaining in office constitute fewer than a
quorum of the board, the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected
by the shareholders, the director shall hold office for the unexpired term of
his or her predecessor in office; except that, if the director's predecessor
was elected by the directors to fill a vacancy, the director elected by the
shareholders shall hold the office for the unexpired term of the last
predecessor elected by the shareholders.
<PAGE>
If the vacant office was held by a director elected by a voting group of
shareholders, only the holders of shares of that voting group are entitled to
vote to fill the vacancy if it is filled by the shareholders, and, if one or
more of the remaining directors were elected by the same voting group, only
such directors are entitled to vote to fill the vacancy if it is filled by the
directors.
Section 3.12 RESIGNATION. Any director of the corporation may resign at
any time by giving written notice to the Secretary of the corporation. The
resignation of any director shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. When one or more directors shall resign from
the board, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective.
Section 3.13 REMOVAL. Subject to any limitations contained in the
Articles of Incorporation, any director or directors of the corporation may be
removed at any time, with or without cause, in the manner provided in the
Colorado Business Corporation Act.
Section 3.14 COMMITTEES. By resolution adopted by a majority of the Board
of Directors, the directors may designate two or more directors to constitute
a committee, any of which shall have such authority in the management of the
corporation as the Board of Directors shall designate and as shall be
prescribed by the Colorado Business Corporation Act and Article XI of these
Bylaws.
Section 3.15 COMPENSATION. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, or the Board of
Directors, each director may be paid his or her expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as director or a fixed sum for attendance at each meeting of the Board
of Directors or both. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Section 3.16 PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless (i) the director objects at the beginning
of the meeting, or promptly upon his or her arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his or her dissent or abstention as to any
specific action taken be entered in the minutes of the meeting, or (iii) the
director causes written notice of his or her dissent or abstention as to any
specific action to be received by the presiding officer or the meeting before
its adjournment or by the corporation promptly after the adjournment of the
meeting. A director may dissent to a specific action at a meeting, while
assenting to others. The right to dissent to a specific action taken at a
meeting of the Board of Directors or a committee of the board shall not be
available to a director who voted in favor of such action.
<PAGE>
ARTICLE IV
OFFICERS
Section 4.1 NUMBER. The officers of the corporation shall be a President,
a Secretary, and a Treasurer, each of whom must be a natural person who is
eighteen years or older and shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. Any two or more offices may be
held by the same person.
Section 4.2 ELECTION AND TERM OF OFFICE. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after the
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
practicable. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his or her death or until
he shall resign or shall have been removed in the manner hereinafter provided.
Section 4.3 REMOVAL AND RESIGNATION. Any officer or agent may be removed
by the Board of Directors at any time, with or without cause, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
An officer or agent may resign at any time by giving written notice of
resignation to the Secretary of the corporation. The resignation is effective
when the notice is received by the corporation unless the notice specifies a
later effective date.
Section 4.4 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
Section 4.5 PRESIDENT. The President shall be the chief executive officer
of the corporation and, subject to the control of the Board of Directors,
shall, in general, supervise and control all of the business and affairs of
the corporation. He or she shall, when present, and in the absence of a Chair
of the Board, preside at all meetings of the shareholders and of the Board of
Directors. He or she may sign, with the Secretary or any other proper officer
of the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation and deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be
otherwise signed or executed; and in general shall perform all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time.
<PAGE>
Section 4.6 VICE PRESIDENT. If elected or appointed by the Board of
Directors, the Vice President (or in the event there be more than one vice
president, the vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall, in the absence of the President or in the event of his or her
death, inability or refusal to act, perform all duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certificates for shares of the corporation; and shall perform such
other duties as from time to time may be assigned to him by the President or
by the Board of Directors.
Section 4.7 SECRETARY. The Secretary shall: (a) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
Board of Directors, a record of all actions taken by the shareholders or Board
of Directors without a meeting, a record of all actions taken by a committee
of the Board of Directors in place of the Board of Directors on behalf of the
corporation, and a record of all waivers of notice and meetings of
shareholders and of the Board of Directors or any committee thereof (b) ensure
that all notices are duly given in accordance with the provisions of these
Bylaws and as required by law, (c) serve as custodian of the corporate records
and of the seal of the corporation and affix the seal to all documents when
authorized by the Board of Directors, (d) keep at the corporation's registered
office or principal place of business a record containing the names and
addresses of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held
by, each shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (e) maintain at the corporation's
principal office the originals or copies of the corporation's Articles of
Incorporation, Bylaws, minutes of all shareholders' meetings and records of
all action taken by shareholders without a meeting for the past three years,
all written communications within the past three years to shareholders as a
group or to the holders of any class or series of shares as a group, a list of
the names and business addresses of the current directors and officers, a copy
of the corporation's most recent corporate report filed with the Secretary of
State, and financial statements showing in reasonable detail the corporation's
assets and liabilities and results of operations for the last three years, (f)
have general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (g) authenticate records of the corporation,
and (h) in general, perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to him by the president
or by the board of the Board of Directors. Assistant Secretaries, if any,
shall have the same duties and powers, subject to supervision by the
Secretary. The directors and/or shareholders may however respectively
designate a person other than the Secretary or Assistant Secretary to keep the
minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in written form
or in any form capable of being converted into written form within a
reasonable time.
<PAGE>
Section 4.8 TREASURER. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these Bylaws; and
(c) in general perform all of the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him or her by
the President or by the Board of Directors.
Section 4.9 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries, when authorized by the Board of Directors, may sign with the
Chair or Vice Chair of the Board of Directors or the President or a Vice
President certificates for shares of the corporation the issuance of which
shall have been authorized by a resolution of the Board of Directors. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
Section 4.10 BONDS. If the Board of Directors by resolution shall so
require, any officer or agent of the corporation shall give bond to the
corporation in such amount and with such surety as the Board of Directors may
deem sufficient, conditioned upon the faithful performance of their respective
duties and offices.
Section 4.11 SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 5.1 CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
Section 5.2 LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 5.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 5.4 DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
<PAGE>
ARTICLE VI
SHARES, CERTIFICATES FOR SHARES
AND TRANSFER OF SHARES
Section 6.1 REGULATION. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
Section 6.2 SHARES WITHOUT CERTIFICATES. Unless otherwise provided by the
Articles of Incorporation or these Bylaws, the board of directors may
authorize the issuance of any of its classes or series of shares without
certificates. Such authorization shall not affect shares already represented
by certificates until they are surrendered to the corporation.
Within a reasonable time following the issue or transfer of shares
without certificates, the corporation shall send the shareholder a complete
written statement of the information required on certificates by the Colorado
Business Corporation Act.
Section 6.3 CERTIFICATES FOR SHARES. If shares of the corporation are
represented by certificates, the certificates shall be respectively numbered
serially for each class of shares, or series thereof, as they are issued,
shall be impressed with the corporate seal or a facsimile thereof, and shall
be signed by the Chair or Vice Chair of the Board of Directors or by the
President or a Vice President and by the Treasurer or an Assistant Treasurer
or by the Secretary or an Assistant Secretary; provided that such signatures
may be facsimile if the certificate is countersigned by a transfer agent, or
registered by a registrar other than the corporation itself or its employee.
Each certificate shall state the name of the corporation, the fact that the
corporation is organized or incorporated under the laws of the State of
Colorado, the name of the person to whom issued, the date of issue, the class
(or series of any class), and the number of shares represented thereby. A
statement of the designations, preferences, qualifications, limitations,
restrictions and special or relative rights of the shares of each class shall
be set forth in full or summarized on the face or back of the certificates
which the corporation shall issue, or in lieu thereof, the certificate may set
forth that such a statement or summary will be furnished to any shareholder
upon request without charge. Each certificate shall be otherwise in such form
as may be prescribed by the Board of Directors and as shall conform to the
rules of any stock exchange on which the shares may be listed.
The corporation shall not issue certificates representing fractional
shares and shall not be obligated to make any transfers creating a fractional
interest in a share of stock. The corporation may, but shall not be obligated
to, issue scrip in lieu of any fractional shares, such scrip to have terms and
conditions specified by the Board of Directors.
Section 6.4 CANCELLATION OF CERTIFICATES. All certificates surrendered to
the corporation for transfer shall be canceled and no new certificates shall
be issued in lieu thereof until the former certificate for a like number of
shares shall have been surrendered and canceled, except as herein provided
with respect to lost, stolen or destroyed certificates.
<PAGE>
Section 6.5 LOST, STOLEN OR DESTROYED CERTIFICATES. Any shareholder
claiming that his certificate for shares is lost, stolen or destroyed may make
an affidavit or affirmation of that fact and lodge the same with the Secretary
of the corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation),
a new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
Section 6.6 TRANSFER OF SHARES. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of
the corporation shall be transferable on the books of the corporation by the
holder thereof in person or by his duly authorized attorney, upon the
surrender and cancellation of a certificate or certificates for a like number
of shares. Upon presentation and surrender of a certificate for shares
properly endorsed and payment of all taxes therefor, the transferee shall be
entitled to a new certificate or certificates in lieu thereof. As against the
corporation, a transfer of shares can be made only on the books of the
corporation and in the manner hereinabove provided, and the corporation shall
be entitled to treat the holder of record of any share as the owner thereof
and shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
statutes of the State of Colorado.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of December
in each calendar year.
ARTICLE VIII
DISTRIBUTIONS
The Board of Directors may from time to time declare, and the corporation
may pay, distributions on its outstanding shares in the manner and upon the
terms and conditions provided by the Colorado Business Corporation Act and its
Articles of Incorporation.
<PAGE>
ARTICLE IX
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "CORPORATE SEAL."
ARTICLE X
The Board of Directors shall have power, to the maximum extent permitted
by the Colorado Business Corporation Act, to make, amend and repeal the Bylaws
of the corporation at any regular or special meeting of the board unless the
shareholders, in making, amending or repealing a particular Bylaw, expressly
provide that the directors may not amend or repeal such Bylaw. The
shareholders also shall have the power to make, amend or repeal the Bylaws of
the corporation at any annual meeting or at any special meeting called for
that purpose.
AMENDMENTS
ARTICLE XI
EXECUTIVE COMMITTEE
Section 11.1 APPOINTMENT. The Board of Directors by resolution adopted by
a majority of the full Board, may designate two or more of its members to
constitute an Executive Committee. The designation of such Committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 11.2 AUTHORITY. The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority
of the Board of Directors except to the extent, if any, that such authority
shall be limited by the resolution appointing the Executive Committee and
except also that the Executive Committee shall not have the authority of the
Board of Directors in reference to authorizing distributions, filling
vacancies on the Board of Directors, authorizing reacquisition of shares,
authorizing and determining rights for shares, amending the Articles of
Incorporation, adopting a plan of merger or consolidation, recommending to the
shareholders the sale, lease or other disposition of all or substantially all
of the property and assets of the corporation otherwise than in the usual and
regular course of its business, recommending to the shareholders a voluntary
dissolution of the corporation or a revocation thereof, or amending the Bylaws
of the corporation.
Section 11.3 TENURE AND QUALIFICATIONS. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his or her designation and until his or her successor
is designated as a member of the Executive Committee and is elected and
qualified.
<PAGE>
Section 11.4 MEETINGS. Regular meetings of the Executive Committee may be
held without notice at such time and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee
may be called by any member thereof upon not less than one day's notice
stating the place, date and hour of the meeting, which notice may be written
or oral, and if mailed, shall be deemed to be delivered when deposited in the
United States mail addressed to the member of the Executive Committee at his
or her business address. Any member of the Executive Committee may waive
notice of any meeting and no notice of any meeting need be given to any member
thereof who attends in person. The notice of a meeting of the Executive
Committee need not state the business proposed to be transacted at the
meeting.
Section 11.5 QUORUM. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 11.6 INFORMAL ACTION BY EXECUTIVE COMMITTEE. Any action required
or permitted to be taken by the Executive Committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the Executive Committee entitled to
vote with respect to the subject matter thereof.
Section 11.7 VACANCIES. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 11.8 RESIGNATIONS AND REMOVAL. Any member of the Executive
Committee may be removed at any time with or without cause by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the corporation, and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 11.9 PROCEDURE. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall
not be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information
at the meeting thereof held next after the proceedings shall have been taken.
<PAGE>
ARTICLE XII
EMERGENCY BY-LAWS
The Emergency Bylaws provided in this Article XII shall be operative
during any emergency in the conduct of the business of the corporation
resulting from a catastrophic event that prevents the normal functioning of
the offices of the Corporation, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Articles of Incorporation of the
corporation or in the Colorado Business Corporation Act. To the extent not
inconsistent with the provisions of this Article, the Bylaws provided in the
preceding articles shall remain in effect during such emergency and upon its
termination the Emergency Bylaws shall cease to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer or
director of the corporation. Notice of the time and place of the meeting shall
be given by the person calling the meeting to such of the directors as it may
be feasible to reach by any available means of communication. Such notice
shall be given at such time in advance of the meeting as circumstances permit
in the judgment of the person calling the meeting.
(b) At any such meeting of the Board of Directors, a quorum shall consist
of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such emergency,
may, effective in the emergency, change the principal office or designate
several alternative principal offices or regional offices, or authorize the
officers so to do.
(d) The Board of Directors, either before or during any such emergency,
may provide, and from time to time modify, lines of succession in the event
that during such an emergency any or all officers or agents of the corporation
shall for any reason be rendered incapable of discharging their duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the shareholders, but
no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action taken prior to the time of such repeal or
change. Any amendment of these Emergency Bylaws may make any further or
different provision that may be practical and necessary for the circumstances
of the emergency.
<PAGE>
CERTIFICATE
I hereby certify that the foregoing Amended Bylaws, consisting of
twenty-four (24) pages, including this page, constitute the Bylaws of
NORTHBOROUGH HOLDINGS, INC., adopted by the Board of Directors of the
corporation as of February 29, 2000.
_______________________________
_____________________,
Secretary
CONSENT OF COUNSEL
We hereby consent to the use of our name as legal counsel in the Form 10SB12G
Registration Statement filed pursuant to Section 12 of the Securities Exchange
Act of 1934 by NORTHBOROUGH HOLDINGS, INC.
NADEAU & SIMMONS, P.C.
/s/ Mark T. Thatcher
By:___________________
Providence, RI
CONSENT OF AUDITOR
We hereby consent to the use of our name as independent auditor in the Form
10SB12G Registration Statement filed pursuant to Section 12 of the Securities
Exchange Act of 1934 by NORTHBOROUGH HOLDINGS, INC.
/s/ Rooney Plotkin & Willey, LLP
ROONEY PLOTKIN & WILLEY, LLP
Providence, RI
EXHIBIT 99.1
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress encouraged
public companies to make "forward-looking statements" by creating a safe
harbor to protect companies from securities law liability in connection with
forward-looking statements. NORTHBOROUGH HOLDINGS, INC. ("Northborough" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe
harbor provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on
various expectations and assumptions concerning future events and they are
subject to numerous known and unknown risks and uncertainties which could
cause actual events or results to differ materially from those projected. Due
to those uncertainties and risks, the investment community is urged not to
place undue reliance on written or oral forward-looking statements of
Northborough. The Company undertakes no obligation to update or revise this
Safe Harbor Compliance Statement for Forward-Looking Statements (the "Safe
Harbor Statement") to reflect future developments. In addition, Providence
Capital undertakes no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results over time.
