Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss.240.14a-12
LITTLE PRINCE PRODUCTIONS, LTD.
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-1l(c)(1)(ii), 14a-6(I)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(I)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of Shareholders of Little Prince Productions, Ltd. to be held at
38 South Audley Street, Mayfair, London W1Y 5DH, England on Thursday, February
29, 1996 at 9:30 a.m. local time.
The Notice of Special Meeting of Shareholders and the Proxy Statement
that follow describe the business to be conducted at the meeting. We will also
report on matters of current interest to our shareholders.
Whether you own a few or many shares of stock, it is important that
your shares be represented. If you cannot personally attend the meeting, we
encourage you to make certain you are represented at the meeting by signing and
dating the accompanying proxy card and promptly returning it in the enclosed
envelope. Returning your proxy card will not prevent you from voting in person,
but will assure that your vote will be counted if you are unable to attend the
meeting.
Sincerely,
/s/ Adrian P. Kirby
February 9, 1996 ------------------------------------
Adrian P. Kirby, Chairman, President
and Chief Executive Officer
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held February 29, 1996
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders (the
"Meeting") of Little Prince Productions, Ltd. (the "Company") will be held at 38
South Audley Street, Mayfair, London W1Y 5DH, England on Thursday, February 29,
1996 at 9:30 a.m. local time, for the following purposes:
1. To consider and vote upon a change in the Company's state of
incorporation from New York to Colorado by means of a merger
of the Company into Atlantic Industries, Inc., a newly
organized Colorado corporation wholly owned by the Company.
2. To consider and vote upon the terms of the merger agreement
which provides for, among other things, a 10 for 1 reverse
stock split and an increase in the number of authorized shares
of the Company from 25,000,000 to 50,000,000.
3. To consider, consent to and authorize the Board of Directors
of the Company to sell the Company's interest in the common
stock of its wholly owned subsidiary, LPPL Corp., a New York
Corporation, to an independent third-party.
4. To consider, consent to and authorize the Board of Directors
of the Company to vote, as sole shareholder of LPPL Corp., to
dissolve LPPL Corp.
Although the Company's shareholders will have the opportunity to
separately vote on proposals 1 through 4 above (collectively the "Proposals" and
individually a "Proposal"), Proposals 1 and 2, and Proposals 3 and 4 are
mutually contingent upon shareholder approval of each other. For example, if
shareholders approve Proposal 1 but fail to approve Proposal 2, or approve
Proposal 2 but fail to approve Proposal 1, neither Proposal 1 nor Proposal 2
will be adopted. The same result will occur in the event the Shareholders
approve Proposal 3 but fail to approve Proposal 4; or approve Proposal 4 but
fail to approve Proposal 3.
Only shareholders of record at the close of business on Wednesday,
February 7, 1996 are entitled to notice of and to vote at the Meeting or at any
postponements or adjournments thereof.
You are cordially invited and urged to attend the Meeting. All
shareholders, whether or not they expect to attend the Meeting in person, are
requested to complete, date and sign the enclosed form of Proxy and return it
promptly in the postage paid, return-addressed envelope provided for that
purpose. By returning your Proxy promptly you can help the Company avoid the
expense of follow-up mailings to ensure a quorum so that the Meeting can be
held. Shareholders who attend the Meeting may revoke a prior proxy and vote in
person as set forth in the Proxy Statement.
THE ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSED ITEMS. YOUR VOTE IS IMPORTANT.
By Order of the Board of Directors
/s/ Adrian P. Kirby
----------------------------------------
Adrian P. Kirby, Chairman, President and
Chief Executive Officer
Dated: February 9, 1996
<PAGE>
LITTLE PRINCE PRODUCTIONS, LTD.
38 South Audley Street
Mayfair, London
England W1Y 5DH
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PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
To be held February 29, 1996
-----------------------------------------------------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of the Little Prince Productions, Ltd.
(the "Company") of proxies to be voted at a Special Meeting of Shareholders of
the Company to be held at 38 South Audley Street, Mayfair, London W1Y 5DH,
England on Thursday, February 29, 1996 at 9:30 a.m. local time, and at any and
all postponements or adjournments thereof (collectively referred to herein as
the "Meeting"). This Proxy Statement, the accompanying form of proxy (the
"Proxy") and the Notice of Special Meeting will be first mailed or given to the
Company's shareholders on or about February 9, 1996.
Because many of the Company's shareholders may be unable to attend the
Meeting in person, the Board solicits proxies by mail to give each shareholder
an opportunity to vote on all matters presented at the Meeting. Shareholders are
urged to: (i) read this Proxy Statement carefully; (ii) specify their choice in
each matter by marking the appropriate box on the enclosed Proxy card; and (iii)
sign, date and return the Proxy card by mail in the postage-paid, return
addressed envelope provided for that purpose.
All shares of the Company's $.01 par value common stock (the "Common
Stock" or the "Shares"), represented by properly executed and valid Proxies
received in time for the Meeting will be voted at the Meeting in accordance with
the instructions marked thereon or otherwise as provided therein, unless such
Proxies have previously been revoked. Unless instructions to the contrary are
marked, or if no instructions are specified, Shares represented by the Proxies
will be voted for the Proposals (as defined below) set forth on the Proxy. Any
Proxy may be revoked at any time prior to the exercise thereof by submitting
another Proxy bearing a later date or by giving written notice of revocation to
the Company at the Company's address indicated above or by voting in person at
the Meeting. Any notice of revocation sent to the Company must include the
shareholder's name and must be received prior to the Meeting to be effective.
VOTING
Only persons holding Shares of record at the close of business on
Wednesday, February 7, 1996 (the "Record Date") will be entitled to receive
notice of and to vote at the Meeting. On the Record Date there were 24,999,236
Shares outstanding, each of which will be entitled to one vote on each matter
properly submitted for vote to the Company's shareholders at the Meeting. The
presence, in person or by proxy, of holders of a majority of Shares entitled to
vote at the Meeting constitutes a quorum for the transaction of business at the
Meeting.
An affirmative vote of two-thirds of the total Shares outstanding is
required to: (i) change the Company's state of incorporation from New York to
Colorado by means of a merger of the Company into Atlantic Industries, Inc., a
newly organized Colorado corporation wholly owned by the Company ("Proposal 1");
(ii) approve the terms of the merger agreement which provides for, among other
things, a 10 for 1 reverse stock split and an increase in the number of
authorized shares of the Company to 50,000,000 ("Proposal 2"); (iii) consent to
and authorize the
<PAGE>
Board to sell the Company's interest in the common stock of its wholly owned
subsidiary, LPPL Corp., a New York Corporation, to an independent third-party
("Proposal 3"); and (iv) consent to and authorize the Board to vote, as sole
shareholder of LPPL Corp., to dissolve LPPL Corp. ("Proposal 4").
Although the Company's shareholders will have the opportunity to
separately vote on proposals 1 through 4 above (collectively the "Proposals" and
individually a "Proposal"), Proposals 1 and 2, and Proposals 3 and 4 are
mutually contingent upon shareholder approval of each other. For example, if
shareholders approve Proposal 1 but fail to approve Proposal 2, or approve
Proposal 2 but fail to approve Proposal 1, neither Proposal 1 nor Proposal 2
will be adopted. The same result will occur in the event the shareholders
approve Proposal 3 but fail to approve Proposal 4; or approve Proposal 4 but
fail to approve Proposal 3.
Those Shares present, in person or by proxy, including Shares as to
which authority to vote on any proposal is withheld, Shares abstaining as to any
proposal, and broker non-votes (where a broker submits a proxy but does not have
authority to vote a customer's shares on one or more matters) on any proposal,
will be considered present at the Meeting for purposes of establishing a quorum.
Each will be tabulated separately.
Abstentions are counted in tabulations of the votes cast on proposals
presented to shareholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved. Accordingly, an abstention
on any of the Proposals will have the same legal effect as a vote against such
Proposal, while broker non-votes will have no effect.
Votes cast by Proxy will be tabulated by Peter N. Chapman, Treasurer
and Secretary of the Company. Votes cast by Proxy or in person at the Meeting
will be counted by the independent persons appointed by the Company to act as
election inspectors for the Meeting.
GENERAL OVERVIEW, BACKGROUND AND REASONS FOR THE PROPOSALS
General
On November 16, 1992 (the "Acquisition Date"), the Company acquired and
became the successor to Tyne River Properties, plc, an English company ("TRP")
through a "Reverse Acquisition" pursuant to which the shareholders of TRP
acquired an aggregate of 11,899,236 shares of Common Stock, in exchange for all
of the issued and outstanding capital stock of TRP.
Following the Acquisition Date, the Company's business activities were
intended to be conducted in three separate segments, with TRP's proposed real
estate acquisition and investment operations constituting the Company's
principal business and the theatrical production operations of LPPL Corp.
constituting a smaller, but continuing area of operations. Certain real estate
development projects and operations, owned and conducted by TRP at the
Acquisition Date, were intended to constitute a third segment which was to be
phased out as promptly as practicable through the completion and/or disposition
of all such projects. Through and until March 29, 1994 the Company conducted or
attempted to initiate operations in these three segments in accordance with such
intentions by: (a) attempting to obtain financing, through public or private
sales of Common Stock, for its proposed real estate acquisition and investment
business; (b) endeavoring to complete and/or dispose of its real estate
development projects on favorable terms; and (c) continuing its operations in
the field of theatrical production through its wholly owned subsidiary LPPL
Corp. Ultimately, however, the Company was unable to raise any financing with
which to commence its proposed real estate investment business. In addition, the
Company was forced by unforeseen circumstances to divest itself of all of its
real estate development projects rendering TRP insolvent by early 1994. These
events led to the Company's sale of TRP in March of 1994, at a substantial loss,
to Bravecorp Limited, a United Kingdom company wholly owned by Riparian
Investments Limited and an affiliate of Riparian Securities Limited ("RSL"), and
ultimately led to the Company entering into the RSL Agreement (discussed below
and in greater detail under "CHANGE IN CONTROL").
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<PAGE>
On August 22, 1994, the Company's then current management, in an effort
to improve the Company's business prospects, entered into an agreement with RSL
(the "RSL Agreement"). RSL originally entered into the RSL Agreement with the
intention of arranging, within six months, for the Company to acquire through
the issuance of large blocks of Common Stock sufficient investment properties
and related business activities to enable the Company to satisfy the minimum
financial criteria for inclusion in the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"). Such acquisitions were
originally intended to consist of commercial properties, located in the London
area, preferably untenanted or under tenanted, the values of which could be
enhanced by Company though the installation of suitable tenants obtained for
such properties by the Company. Due the circumstances discussed below, the
Company has been unable to effectuate RSL's original intentions.
Circumstances Resulting in Delay
Upon consummation of the RSL Agreement and related transactions, the
Company lacked a sufficient amount of authorized but unissued Shares to acquire
suitable investment properties (the Company had, and still only has, a total of
764 authorized but unissued Shares). In order to increase the number of
authorized Shares, the Company needed to amend its Certificate of Incorporation,
which in turn required holding a shareholders meeting and distributing a proxy
statement soliciting the approval of the Company's shareholders owning a
majority of the Shares outstanding. In order to distribute the proxy statement,
however, the Company first had to prepare and file its past and currently due
annual reports on Forms 10-K and quarterly reports on Forms 10-Q with the
Securities and Exchange Commission (the "Commission"). During the past year the
Company worked on achieving this goal and on preparing this Proxy Statement. At
the time this Proxy Statement is distributed, the Company will be current in its
filings with the Commission.
Although the foregoing circumstances increased the period of time
required to implement RSL's original intentions, with certain exceptions, the
Board's business plan has not materially changed from that originally
contemplated by RSL.
The Company's Business Plan
The Company has expanded its business plan to encompass the potential
acquisition of service or manufacturing businesses, as well as commercial real
estate properties for equity in the Company. In addition, although the Company
previously intended that the Company operate its theatrical production
activities as a separate business segment and originally intended that LPPL
Corp. would increasingly constitute a less significant part of the Company's
business, the Board has determined that the dissolution or sale of LPPL Corp. at
this time would be in the best interest of the Company (see "PROPOSAL NO. 3 AND
PROPOSAL NO 4-Reasons for the LPPL Transactions" for a description of the
Board's basis for this determination).
To the extent the Company's shareholders approve Proposals 1 and 2 (the
"Reincorporation Proposals"), the Company's current acquisition strategy
involves the possibility of acquiring, in exchange for Common Stock, existing
businesses that management believes will offer the opportunity of sound
sustainable earnings with the potential for growth. Such acquisitions may result
in the merger of another corporation into the Company in return for Common Stock
(which may not require shareholder approval) or the merger of the Company into
another entity. The Board, however, does not intend to merge the Company into
another entity which, in any event, would require approval of the Company's
shareholders.
The Company also does not intend to seek investments that involve a
high degree of dependence on specialized skills or market conditions or which
will be at risk from rapid changes in market conditions or from technological
change. All potential acquisitions will be analyzed in depth by the executive
officers of the Company and approved by the Board. Advice from independent
advisors will be sought as deemed appropriate by the executive officers.
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<PAGE>
In evaluating potential investments, the Company will consider, among
other factors: (a) the current anticipated cash flows and their ability to meet
operational needs and provide a competitive market return on the equity
invested; (b) the potential for capital appreciation; (c) the geographical area
and location of the business and/or property (which businesses or properties may
be located in the United Kingdom, the United States or elsewhere); (d) the
ability to increase cash flow through a capable management; (e) the capability
of existing management; (f) the market positions and relative strengths of the
business related to its competitors; (g) the general economic growth and tax and
regulatory environment of the communities in which the business operates; and
(h) the prospects for liquidity, through sale, financing or refinancing.
The Company further intends to keep debt to conservative levels
relative to equity with regard to both mature investments and new acquisitions.
The Company also may raise funds by selling Common Stock in public or private
transactions. The Company's shareholders do not and will not have any preemptive
rights with respect to any additional Common Stock issued. Moreover, there can
be no assurance that the Company will be able to raise any funds through the
sale of Common Stock.
In accordance with their fiduciary duties to the Company and its
shareholders, the Board may determine that a change from the Company's current
investment strategies and policies is in the best interest of the Company and
its shareholders and shareholder approval will not be necessary for a change in
the Company's investment policies. Although the Company currently does not
anticipate such a change, should the Board deem it advisable, changes will be
made. Alternative methods of financing, which could be adopted by the Board in
the future, could include the issuance, in public or private transactions, of up
to 10,000,000 shares of preferred stock (authorized for issuance under Proposal
2) in addition to short, intermediate or long-term borrowings, on a secured or
unsecured basis. Such borrowings could be in the form of bank borrowings,
including unsecured borrowings or borrowings secured on the Company's then
existing assets and/or assets being acquired with borrowed funds. Borrowings
could also be made by the Company by way of the issuance of senior or
subordinated notes or debentures, including notes or debentures convertible into
shares of Common Stock. The Company may also combine any of the above financing
methods. The bylaws of the Company do not require the Board to review the
Company's investment policies at any specific interval to determine whether such
policies are being followed.
As of the date hereof, the Company has no present understanding,
arrangement or contractual commitment respecting the acquisition of, or the sale
of Common Stock to, any specific individual, entity and/or property.
Reasons for Proposals 1, 2, 3 and 4
The Board does not believe that it has the ability to raise adequate
resources from its existing revenue operations. The Board believes that the
Reincorporation Proposals and Proposals 3 and 4 (the "LPPL Proposals") will
allow the Board to benefit from increased flexibility and certainty in regard to
its corporate affairs and offer the Company the best chance of becoming
profitable in the future. Although the Board can give no assurance that any of
the perceived benefits of the Reincorporation Proposals or the LPPL Proposals
discussed herein will materialize, the Board believes that the most significant
advantages will be as follows:
o Provide the Company with the ability to carry out its business
plan through the issuance of additional shares of Common Stock
to acquire suitable companies and obtain additional funds
through the sale of Common Stock in private or public
transactions;
o Provide the Board with increased flexibility for corporate
transactions through the ability to issue additional shares of
Common Stock or preferred stock;
o Provide the Board with greater certainty in regard to its
corporate affairs through the reincorporation of the Company
in Colorado;
o Result in an increase in the book value per Share;
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<PAGE>
o Ultimately enable the Company to become profitable and
potentially qualify the Common Stock for listing on the NASDAQ
SmallCap Market, thus providing the Company's shareholders a
more efficient means of selling their currently illiquid
investment; and
o Increase the Company's financial position and the ability of
the Company's management to focus its activities on the
acquisition of suitable businesses, through the sale or
dissolution of LPPL Corp.
In considering the Reincorporation Proposals and the LPPL Proposals the
Board also realized that there were certain disadvantages associated therewith,
including, without limitation:
o The change in the state of the Company's state of
incorporation will decrease the shareholder vote required for
certain acquisitions from two-thirds to a majority of the
total shares outstanding.
o The increase in the number of authorized shares (50,000,000)
in conjunction with the decrease in the total number of shares
outstanding (due to the 10 to 1 exchange ratio) may result in
a substantial dilution in the voting power of the Company's
current shareholders and in the book value per share;
o The ability of the Board to issue additional Shares without
shareholder approval could be used by the Board to defeat
certain transactions potentially beneficial to shareholders
(such as a hostile tender offer at a substantial premium);
o There is no guarantee that the Company will be able to locate
suitable businesses to acquire or investors interested in
purchasing the Common Stock;
o The sale or dissolution of LPPL Corp. would result in the loss
of the Company's only form of revenue resulting in the Company
constituting a shell corporation. To the extent the
Reincorporation Proposals are not approved, the Company would
essentially be left without any means to derive revenue in the
future. The same result would occur if the Reincorporation
Proposals are approved, but the Company is unable to locate
potential business for acquisition;
o The issuance of additional shares of Common Stock may cause
further changes in the control of the Company and its
management; and
o The issuance by the Company of preferred stock or senior or
subordinated notes or debentures to finance any acquisitions
would result in the creation of creditors of the Company
having rights which are senior to those of the shareholders
owning Common Stock.
Despite these potential disadvantages, the Board believes the
Reincorporation Proposals and the LPPL Proposals to be in the best interests of
the Company. In view of the Company's current financial condition (see "INDEX TO
FINANCIAL STATEMENTS"), management believes that the Proposals described herein
could lead to a material improvement in the Company's financial conditions and
prospects. Accordingly, the Board strongly recommends that the Company's
shareholders vote "FOR" the Reincorporation Proposals and the LPPL Proposals. To
the extent the Reincorporation Proposals are not approved, the Board may
consider requesting a shareholder vote on the dissolution of the Company, an
option not previously considered by the Board.
5
<PAGE>
PROPOSAL NO. 1 AND PROPOSAL NO. 2
OVERVIEW
General
The Board has approved the Reincorporation Proposals and unanimously
recommends their approval by the Company's shareholders. If either Proposal 1 or
Proposal 2 is not approved by two-thirds of the total Shares outstanding,
neither Proposal 1 nor Proposal 2 will be adopted. The Company's officers and
directors, who together hold 26.3% of the Common Stock, have indicated that they
intend to vote "FOR" the Reincorporation Proposals.
If approved, the Reincorporation Proposals, will result in a change in
the Company's state of incorporation from New York to Colorado pursuant to an
Agreement and Plan of Merger (the "Merger Agreement"). The Merger Agreement
provides for the merger (the "Merger") of the Company, a New York corporation,
with and into Atlantic Industries, Inc., a newly formed Colorado corporation
wholly owned by the Company ("Atlantic"). Atlantic was organized to facilitate
the Reincorporation Proposals, and currently does not conduct any business.
Atlantic's principal executive officers will be located at 38 South Audley
Street, Mayfair, London W1Y 5DH, England.
If the shareholders approve the Reincorporation Proposals, Atlantic
will be the surviving corporation (the "Surviving Corporation") in the merger.
The principal effect of the Reincorporation Proposals will be to (i) change the
law applicable to the Company's corporate affairs from the New York Business
Corporation Law ("New York Law") to the Colorado Business Corporation Act
("Colorado Law"), (ii) reduce the number of Shares issued and outstanding, and
(iii) increase the number of Shares authorized for issuance. The approval of the
Reincorporation Proposals will not result in any change in the business,
management, location of principal executive offices, assets, liabilities or net
worth of the Company. By operation of law, at the effective date of the Merger,
all assets, property, rights, liabilities and obligations of the Company will be
transferred to and assumed by Atlantic.
The following discussion summarizes certain aspects of the
Reincorporation Proposals, including certain material differences between New
York Law and Colorado Law. This summary does not purport to be a complete
description of the Reincorporation Proposals or the differences between
shareholders' rights under New York Law and Colorado Law and is qualified by
reference to (a) the Merger Agreement between the Company and Atlantic attached
hereto as Appendix A; (b) the Articles of Incorporation of Atlantic (the "New
Articles") attached hereto as Appendix B; and (c) the Bylaws of Atlantic (the
"New Bylaws") attached hereto as Appendix C. Copies of the Company's current
Certificate of Incorporation, as amended (the "Present Certificate") and current
Amended Bylaws (the "Present Bylaws") are available for inspection at the
Company's executive office and copies will be sent to shareholders, without
charge, upon request.
Approval of the Reincorporation Proposals by the Company's shareholders
will constitute approval of the Merger, the Merger Agreement, the New Articles
and the New Bylaws, as well as other matters included in the Reincorporation
Proposals and described in this Proxy Statement. In accordance with the terms of
the Merger Agreement, the New Articles and the New Bylaws will replace the
Present Certificate and Present Bylaws as the charter documents affecting
corporate governance and shareholders' rights. For a description of the
differences between the Present Certificate and Present Bylaws and the New
Articles and New Bylaws, see "PROPOSAL 1-Comparison of New York Law and Colorado
Law" and "PROPOSAL 2-Certain Charter Document Provisions." In addition, there
are certain material differences between New York Law and Colorado Law,
including certain differences in shareholders' rights. See "PROPOSALS
1-Comparison of New York Law and Colorado Law" and "PROPOSAL 2-Certain Charter
Document Provisions."
The approval of the Reincorporation Proposals will affect certain
rights of shareholders. Accordingly, shareholders are urged to read carefully
this Proxy Statement and the appendices hereto. Shareholders of the Company
whose shares are not voted in favor of the Reincorporation Proposals will be
eligible to take additional steps to obtain statutory dissenter's rights. See
"PROPOSAL 2-Rights of Dissenting Shareholders" and "Appendix D."
6
<PAGE>
PROPOSAL NO. 1
CHANGE IN STATE OF INCORPORATION TO COLORADO
Reason for Change in State of Incorporation
General. As more fully discussed under "PROPOSAL NO. 3 AND PROPOSAL NO.
4-Background," the Company was originally incorporated in New York in order to
maximize its rights to the literary work entitled "The Little Prince." Upon
consummation of the Reverse Acquisition, the Company transferred its theatrical
operations to the its wholly owned subsidiary LPPL Corp. The Company's only
current contacts with the State of New York arise through its wholly owned
interest in LPPL Corp. If the shareholders approve the LPPL Proposals, the
Company's current indirect contact with New York will no longer exist. In any
event, the Company currently has neither significant business operations in New
York nor other special contacts in New York apart from its historical status as
a New York Corporation.
Because of the Company's minimal contacts with New York and because the
Company must obtain shareholder approval in order to increase the number of
authorized shares of Common Stock, the Board believes that this would be an
opportune time to reincorporate the Company in a state that has more
comprehensive, modern and flexible corporation laws. For a corporation that does
business in only one state, it is usually impractical to be incorporated in any
state other than that state. Because the Company does not currently contemplate
doing business in any single state or country, the Board's decision to
reincorporate in Colorado was the result of other considerations as discussed
below. In addition, although the Company's executive offices are located in
London, England, the Board believes that a domestic corporation is looked on
more favorably by investors and therefore has a greater ability to finance its
activities in the United States capital markets than a foreign corporation.
Accordingly, the Board believes it is in the Company's best interest to remain a
domestic corporation.
Reasons for Selecting Colorado. The Board originally viewed the
possibility of reincorporating in Delaware which, in addition to having modern
and flexible corporation laws, has developed a substantial body of case law
construing Delaware law and establishing public policies with respect to
Delaware corporations. Reincorporating in Delaware, however, would have resulted
in an initial filing fee of approximately $190,000 (due to the number of Shares
that are expected to be authorized for issuance under the New Articles). The
Board subsequently elected to reincorporate the Company in Colorado, which has
an initial filing fee of $50.00 and is the state in which the Company's current
legal counsel is located.
In recent years Colorado has followed a policy of encouraging
incorporation in that state and in furtherance of that policy adopted the
Colorado Business Corporation Act-comprehensive, modern and flexible corporation
laws-that became effective July 1, 1994. The Board believes that reincorporation
in Colorado will provide the Company with greater flexibility and predictability
with respect to its corporate affairs. The Board believes predictability will be
enhanced due to (i) the familiarity of the Company's current counsel with
Colorado Law; (ii) the fact Colorado Law is modeled after the Model Business
Corporation Act (for which substantial secondary materials interpreting its
provisions exist) and (iii) the prior reliance by Colorado courts on Delaware
case law (for which, as described above, a substantial body of case law exists)
in interpreting Colorado corporate law issues. Colorado Law also provides the
Board with greater flexibility in carrying out its business plan as it requires
only a majority, rather than a two-thirds, vote of the outstanding shares in
order to approve certain acquisitions and no shareholder vote in certain
circumstances.
The Company also believes that reincorporating in Colorado will reduce
certain portions of its operating expenses. For example, in the event the
Company becomes profitable in the future, corporate franchise taxes in New York
(for a corporation similar to the Company) are calculated based on (A) the
greater of (i) 8% of the
7
<PAGE>
Company's entire net income base; (ii) 1.78 mills per dollar of business and
investment capital; (iii) 3.5% of the Company's minimum taxable income base; or
(iv) $325 if a corporation has a gross payroll of less than $1,000 up to a
maximum of $1,500; plus (B) .9 mill for each dollar of the portion of the
taxpayer's subsidiary capital allocated within the state. Colorado does not
impose a "franchise tax" per se, rather it imposes a fee equal to $25.00 on the
filing of a corporation's corporate report every two years. In addition, legal
fees charged by midwestern law firms are generally substantially less than those
charged by law firms based in New York. For example, the normal hourly rate
previously paid to the Company's New York counsel was approximately $250, while
the normal hourly rate paid to the Company's current counsel is $100, which
rate, however, will likely increase $10 per year over the next five years. As a
substantial portion of the Company's expenses for the current fiscal year were
legal and accounting expenses, any decrease in such costs will materially
benefit the Company in the short term, although such expenses will have less of
an impact in future years to the extent the Company becomes profitable.
Although Proposal 1 provides the Board with greater flexibility, this
flexibility will decrease the shareholder vote required for certain acquisitions
from two-thirds to a majority of the total shares outstanding and, in the event
additional Shares are issued, may result in a substantial dilution in the voting
power of the Company's current shareholders. These disadvantages could make it
substantially more difficult for the Company's shareholders to defeat certain
transactions to which they are opposed. The Board nevertheless believes that the
reincorporation of the Company in Colorado will result in a reduction in costs
and provide the Board and the Company's management with the necessary
flexibility and predictability in the Company's affairs needed to make a
material improvement in the Company's finances.
Comparison of New York Law and Colorado Law
It is impractical to summarize all of the differences between New York
and Colorado corporate law in this Proxy Statement, however, all differences
between New York Law and Colorado Law that could materially affect the rights of
the Company's shareholders, not elsewhere discussed, are discussed below:
Classification of the Board of Directors. New York Law permits a
classified board with as many as four classes but forbids fewer than three
directors in any class. The Present Certificate and Present Bylaws do not
provide for a classified board. Unless otherwise provided in the certificate of
incorporation or bylaws, directors can be removed only for cause. The Present
Bylaws provide that the Company's shareholders can remove a director with or
without cause.
Colorado Law permits, but does not require, the adoption of a
classified board of directors pursuant to which the directors can be divided
into as many as three classes, with staggered terms of office and with only one
class of directors coming up for election each year. Unless otherwise provided
for in the articles of incorporation, Colorado Law provides that directors who
serve on a classified board can be removed with or without cause. The New
Articles do not provide for such a classified board and do not contradict the
statute with regard to removal.
See "PROPOSAL 2-Certain Charter Document Provisions-Number of Directors."
Shareholder Vote for Mergers: Anti-takeover Provisions. As discussed
above under "GENERAL OVERVIEW, BACKGROUND AND REASONS FOR THE PROPOSALS-Reasons
for Proposals 1, 2, 3 and 4," Colorado Law differs from New York Law in a number
of material respects in regard to mergers and other corporate reorganizations.
New York Law requires that a plan of merger or disposition of all or
substantially all assets not in the usual or regular course of business be
approved by the holders of two-thirds of all outstanding shares entitled to
vote.
Under Colorado Law, holders of only a majority of all outstanding
shares entitled to vote must approve a merger or disposition of all or
substantially all assets. Due to the decrease in the vote required to approve
such transactions, combined with the potential substantial increase in the
number of Shares issued and outstanding after the Merger, the power of the
Company's current shareholders to defeat a proposal they deem unfavorable may be
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substantially diminished. Furthermore, Colorado Law does not require a
shareholder vote of the surviving corporation in a merger if (a) the merger
agreement does not amend the existing certificate of incorporation, (b) each
outstanding share of the surviving corporation before the merger is unchanged,
and (c) the number of voting shares to be issued by the surviving corporation in
the merger does not exceed 20% of the voting shares outstanding of the surviving
corporation immediately prior to the merger. Although the Company has no current
intention of doing so, as a result of this provision the Company could, in the
future, merge with another company, with the Company being the surviving
corporation, without shareholder approval. This provision does not, however,
allow the Company to enter into a merger agreement that would directly affect
the rights of its current shareholders without their approval.
Colorado Law also specifies that if a corporation is entitled to vote
on the sale or disposition of all, or substantially all, of the property of
another entity it controls, and if the shares held by the corporation in such
other entity constitute all, or substantially all, of the property of the
corporation, then the corporation shall consent to such transaction only if the
board of directors proposes and the shareholders approve, by a majority of all
votes entitled to be cast on the transaction, the giving of such consent.
As discussed under "PROPOSAL NO. 3 AND PROPOSAL NO. 4-General," New
York Law does not contain such a provision.
New York Law contains certain anti-takeover provisions that prohibit
any "business combination" between a "domestic corporation" and an "interested
shareholder" for five years after the date that the interested shareholder
became an interested shareholder unless prior to that date the board of
directors of the domestic corporation approved the business combination or the
transaction that resulted in the interested shareholder becoming an interested
shareholder. After five years, such a business combination is permitted only if
(i) it is approved by a majority of the shares not owned by, or by an affiliate
of, the interested shareholder or (ii) certain statutory fair price requirements
are met. An "interested shareholder" is any person who beneficially owns,
directly or indirectly, 20% or more of the outstanding voting stock of the
corporation. New York Law defines a "domestic corporation" as any corporation
that (x) is incorporated in New York and (y) has its principal executive offices
and significant business operations in New York or has at least 250 or 25% of
its employees in New York (including employees of its 80% subsidiaries) and (z)
has at least 10% of its stock beneficially owned by New York residents. The
Company is not currently a New York "domestic corporation" under this
definition. Accordingly, these anti-takeover provisions do not apply to the
Company.
Colorado Law contains no such anti-takeover provisions.
Voting Groups. Colorado Law allows (and the New Bylaws provide) a
corporation to decrease the number of votes required for a quorum at a
shareholders meeting from a majority to one-third of the votes entitled to be
cast by a voting group (as defined below). New York Law also allows a
corporation to decrease the requisite percentage to one-third, although the
Present Bylaws require a majority of all outstanding shares to be present. The
term "voting group" is a term of art not used as such under New York Law, which
generally means all shares which are entitled to vote and be counted
collectively with respect to a matter. For example, under the Present
Certificate and Present Bylaws, a "voting group" would constitute the holders of
the Common Stock. A voting group is thus the basic unit of collective voting at
a shareholders' meeting, and voting by voting groups may provide essential
protection to one or more classes or series of shares against actions that are
detrimental to such interests or class (for example, the decrease in a preferred
dividend to holders of preferred shares in the event Atlantic issued such shares
in the future). The determination of which shares form part of a single group,
in general, must be defined by the articles of incorporation, The New Articles
contain no such designation, however, to the extent the Board in the future
issues Atlantic Preferred Stock (as defined below) the holders of such shares
would likely constitute a voting group with respect to certain matters.
Issuance of Options or Rights to Directors, Officers and Employees. New
York Law requires that the issuance of any rights or options to directors,
officers or employees of a corporation, as an incentive to service or
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continued service with the corporation, be approved by the holders of a majority
of all outstanding shares entitled to vote or be authorized by a plan adopted by
the shareholders by similar vote. Colorado Law contains no such restrictions.
Accordingly, the Board could issue itself (in accordance with its fiduciary
duties to the Company and its shareholders) options and rights to purchase the
Common Stock without shareholder approval. In order to avoid liability under the
securities laws and additional taxes imposed by the Internal Revenue Code of
1986, however, in almost all cases such options and grants would be made
pursuant to a plan approved by the holders of a majority of the outstanding
shares of Common Stock.
Number of Directors. Under New York Law, provided that the number of
directors be not less than three, any higher number may be fixed by the bylaws
or by action of the shareholders or by the board of directors under specific
provisions of the bylaws adopted by the shareholders. The Present Bylaws allow
either the Board, by majority vote, or the shareholders to increase or decrease
the number of directors. Under Colorado Law, a board of directors may fix or
change the authorized number of directors pursuant to a provision of the bylaws.
The power to do so is specifically recognized in the New Bylaws.
Inspection of Shareholders' List. With respect to the inspection of
shareholder's lists, New York Law provides a right of inspection to any person
who shall have been a shareholder for at least six months immediately preceding
his or her demand or any person holding at least 5% of a class of outstanding
shares on at least five days written demand. Under New York Law, a corporation
has certain rights calculated to assure itself that the demand for inspection is
not for a purpose or interest other than that of the corporation.
Colorado Law provides a right of inspection to any person who shall
have been a shareholder for at least three months immediately preceding the
demand or any person holding at least 5% of a class of outstanding shares for a
purpose reasonably related to such person's interest as a shareholder and,
during the 10 days preceding the shareholder's meeting, for any purpose.
Payment of Dividends. Under New York Law dividends may be declared and
distributions may be made out of surplus only, so that the net assets of the
corporation remaining after such declaration, payment or distribution shall at
least equal the amount of its stated capital. When any dividend is paid or any
other distribution is made, in whole or in part, from sources other than earned
surplus, it shall be accompanied by a written notice (a) disclosing the amounts
by which such dividend or distribution affects stated capital, capital surplus
and earned surplus, or (b) if such amounts are not determinable at the time of
such notice, disclosing the approximate effect of such dividend or distribution
upon stated capital, capital surplus and earned surplus and stating that such
amounts are not yet determinable.
Under Colorado Law all distributions of funds with respect to a
corporation's shares, whether as dividends, redemptions, repurchase of shares or
otherwise, may be made if, after such distribution, (i) the corporation can pay
its debts as they presently become due in the usual course of business, and (ii)
the corporation's total assets are not less than the sum of its total
liabilities, plus (unless the articles of incorporation permit otherwise) the
amount that would be needed, if the corporation were to be dissolved at the time
of the distribution, to satisfy the preferential rights, on dissolution, of
shareholders whose preferential rights are superior to those receiving the
distribution.
Vote Required and Management Recommendation
Both Proposal 1 and Proposal 2 must be approved by the affirmative vote
of the holders of at least two-thirds of the outstanding Shares in order for
Proposal 1 to be adopted. If such a vote is not obtained, then the Company will
remain incorporated in New York and the Merger Agreement will be terminated.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1 TO
APPROVE THE CHANGE IN THE STATE OF THE COMPANY'S INCORPORATION TO COLORADO
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PROPOSAL NO. 2
TERMS OF THE MERGER AGREEMENT
Principal Reasons for the Terms of the Merger Agreement
As discussed above under "GENERAL OVERVIEW, BACKGROUND AND REASONS FOR
THE PROPOSALS" the Board is requesting that the Company's shareholders vote to
approve the terms of the Merger Agreement in order to provide the Board a
sufficient amount of Common Stock and preferred stock to acquire existing
businesses that management believes will offer the opportunity of sound
sustainable earnings with the potential for growth.
The Board also believes that the current low market price per share may
impair the marketability of the Stock to institutional investors who often have
restrictions on the price levels of stocks in which the institution is permitted
to invest. Furthermore, in part due to Rule 15g-9 (discussed below), many
brokerage firms are reluctant to recommend or sell lower priced stocks to their
clients because of perceived risk and low commissions or, in the alternative,
extremely high commissions relative to the sales price of the stock. Certain
broker dealers, as a matter of policy, will not extend margin account credit on
low priced stocks; on the other hand, certain investors are attracted to low
priced stock because of its potential for appreciation. The Board believes that
the Company's low per share price creates a negative impression in the market
with respect to the Company and creates additional barriers to increasing the
value of the Shares.
The Board believes that decreasing the total number of shares
outstanding may have a positive effect on the price of the Common Stock. This is
the principal purpose for the 10 to 1 Exchange Ratio (defined below). The
Board's eventual goal is to have the Common Stock listed on the NASDAQ SmallCap
Market, which, in addition to other requirements, requires a minimum price of
$3.00 per share.
The Company's common stock, $.01 par value, is traded in the
over-the-counter market under the symbol "LTLP." Because the Company did not
meet the revised financial criteria for continued inclusion in NASDAQ, it was
delisted therefrom, effective May 27, 1992. Since such date, the Common Stock
has been quoted on the OTC Bulletin Board, however, since April 1, 1994, there
has been so little trading activity in the Common Stock that no bids are shown
for the quarters subsequent thereto (see Footnote 2 to the Table, below).
The following table sets forth representative high and low closing bid
prices by calendar quarters as reported by the National Quotation Bureau and the
OTC Bulletin Board from January 1, 1993 through March 31, 1995(2). Bid
quotations represent prices between dealers, do not include retail mark-ups,
mark-downs or other fees or commissions, and do not necessarily represent actual
transactions.
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Bid Prices
-------------------------
Calendar Quarter Ended High Bid Low Bid
- ---------------------- -------- -------
March 31, 1993 5/16 1/16
June 30, 1993 1/8 1/16
September 30, 1993 1/8 1/8
December 31, 1993 1/8 .01(1)
March 31, 1994 3/8 .10(1)
June 30, 1994 N/A(2) N/A(2)
September 30, 1994 N/A(2) N/A(2)
December 31, 1994 N/A(2) N/A(2)
March 31, 1995 N/A(2) N/A(2)
June 30, 1995 N/A(2) N/A(2)
September 30, 1995 N/A(2) N/A(2)
December 31, 1995 N/A(2) N/A(2)
- ---------------
(1) As reported by the National Quotation Bureau
(2) Management has been advised by the National Association of Securities
Dealers, Inc. that no dealer submitted bid prices for registrant's stock from
April 1, 1994 through December 31, 1995.
Potential Disadvantages. If and/or when the Company is able to meet the
other financial requirements imposed for listing on the NASDAQ SmallCap Market
(discussed below), the Company will likely have issued a substantial amount of
additional Shares reducing the initial effect of the Exchange Ratio. In
addition, the ability of a market to develop in the Common Stock may also be
effected by the regulatory requirements imposed by Rule 15g-9 of the Securities
Exchange Act of 1934, as amended.
Rule 15g-9 applies to penny stocks which, like the Common Stock, are
low-priced over-the-counter securities. Rule 15g-9 generally makes it unlawful
for a broker or dealer to sell any penny stock or effect the purchase of such
stock without meeting the following requirements: (i) prior to the transaction
the broker or dealer must have approved the person's account for transactions in
penny stocks and have received a written agreement containing the identity and
quantity of penny stocks to be purchased; and (ii) in order to approve a persons
account a broker or dealer must first determine the suitability of that customer
to engage in such transactions and then deliver to that person a written
statement setting forth the basis on which the broker or dealer found the
transaction suitable. As a result, broker-dealers are less likely to make a
market for or find prospective purchases for the Common Stock. This in turn
makes it more difficult for a market to develop in the Common Stock; adversely
impacting the Company's ability to raise equity financing.
As a result, there can be no assurance that the Exchange Ratio will
achieve the desired results outlined above, nor can there be any assurance that
price per share immediately after the Exchange Ratio will increase
proportionately with the Exchange Ratio or that any increase can be sustained
for a prolonged period of time. In addition, the additional authorized shares of
Atlantic Capital Stock (as defined below) could be used by the Board to defeat a
hostile takeover, not approved by the Board, but which the shareholders deem to
be in their best interest. Further, the issuance of Atlantic Preferred Stock (as
defined below) would result in creditors' rights senior to those of the common
shareholders.
Despite these potential disadvantages, the Board believes the
additional authorized but unissued Atlantic Shares (as defined below) are
necessary in order for the Company to improve its financial affairs. To the
extent the Company becomes profitable in the future, the Exchange Ratio will
decrease the total number of Shares outstanding (regardless of the number of new
Atlantic Shares that may be issued in the future) which should have
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a positive impact on the book value per share. Moreover, the Board's ability to
issue Atlantic Shares (including preferred stock) allows it increased
flexibility in structuring future financings and acquisitions.
Principal Features of the
Merger Agreement
Pursuant to the Merger Agreement, it is contemplated that the Company
will be merged into Atlantic effective upon the filing of certificates of merger
with the Secretary of State of Colorado and the Secretary of State of New York,
which is expected to take place promptly after the approval of the
Reincorporation Proposals at the Meeting (the "Effective Time"). The Merger
Agreement has been delivered in, and shall be construed under and in accordance
with the laws of the State of New York except to the extent the laws of Colorado
also apply (such as filing the Articles of Merger with the Colorado Secretary of
State).
The information contained herein provides a description of all material
terms of the Merger Agreement. This description does not purport to describe all
terms of the Merger Agreement and is qualified in its entirety by reference to
the Merger Agreement, which is attached as Appendix A and incorporated by
reference herein. The Merger will (i) result in the merger of the Company into
Atlantic, a wholly owned subsidiary of the Company, (ii) reincorporate the
Company in Colorado, (iii) reduce the number of Shares issued and outstanding,
and (iv) increase the number of Shares authorized for issuance.
Increase in Authorized Shares. The Company is presently authorized to
issue 25,000,000 Shares of which 24,999,236 were outstanding as of the Record
Date. Under the New Articles the Company will be authorized to issue 50,000,000
shares of capital stock ("Atlantic Capital Stock" or "Atlantic Shares") of which
40,000,000 shares are reserved for issuance as common stock ("Atlantic Common
Stock") and 10,000,000 shares are reserved for issuance as preferred stock
("Atlantic Preferred Stock"). Any authorized but unissued shares of Atlantic
Common Stock or Atlantic Preferred Stock may be issued by the Board without
shareholder approval where the transaction would not otherwise require such
approval.
Exchange Ratio in the Merger. The Merger Agreement provides that
shareholders will receive one (1) share of Atlantic Common Stock for every ten
(10) Shares of Common Stock (the "Exchange Ratio"). After giving effect to the
Merger, each shareholder of the Surviving Corporation will have the same
proportionate interest in Atlantic that such shareholder previously had in the
Company.
Purpose and Effects of the Exchange Ratio and Increase in the Number of
Authorized Shares. The principal purpose for the 10 to 1 Exchange Ratio is to
enhance the Company's ability to be listed on the NASDAQ SmallCap Market through
increasing the book value per Share. In order for the Company to be listed on
the NASDAQ SmallCap Market it must meet the following requirements: (i) the
Common Stock must have a minimum bid price of $3.00 per share; (ii) the Common
Stock must be held by more than 300 holders, with 100,000 shares publicly held
with a market value equal to $1 million; (iii) the Company must have total
assets of $4 million; (iv) the Company must have capital and surplus of at least
$2 million; and (v) the Company must have at least two registered and active
market makers.
The effect of the Exchange Ratio would be to decrease the number of
outstanding Shares to approximately 2,499,236 and, because the number of Shares
available for issuance will increase to 50,000,000, to increase the number of
Shares available for issuance from approximately 22,500,764 (if no additional
increase was made in the number of authorized shares of Atlantic Capital Stock)
to 37,500,764 shares of Atlantic Common Stock and 10,000,000 shares of Atlantic
Preferred Stock.
There can be no assurance that the market price of the Shares will rise
in proportion to the reduction in the number of Shares outstanding resulting
from the Exchange Ratio. The impact of the Exchange Ratio may be further
mitigated by the fact that the Company will likely need to issue additional
shares of Common Stock in order
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for it to become profitable. Further, there can be no assurance that the Company
will be approved for listing on the NASDAQ SmallCap Market.
Having the additional authorized but unissued Shares would provide the
Board with the flexibility and authority to issue such Shares publicly or
privately in connection with future financing or acquisition transactions, or
for other general corporate purposes, without further action by the shareholders
of the Company, unless such action is required by law. Although the Board can
not determine the exact number of Atlantic Shares it may issue in the future, it
does not expect to issue all Atlantic Shares authorized under the New Articles.
Nevertheless, the Board has elected to have the New Articles authorize a total
of 50,000,000 Atlantic Shares because (i) the number of authorized shares will
not result in any additional cost to the Company (unlike Delaware, Colorado does
not impose fees based on the number of authorized shares) and (ii) to avoid any
additional delays and costs in the event additional Atlantic Shares are needed
in the future. Not authorizing a sufficient amount of Atlantic Capital Stock
would create additional expenses due to the costs associated with soliciting the
vote of the Company's shareholders to increase the number of authorized Atlantic
Shares. The latter option, however, would provide the Company's shareholders
with the opportunity to approve the increase in the number of authorized
Atlantic Shares at a later date.
Although the Board has no present intention of doing so, the additional
authorized but unissued Atlantic Capital Stock could also be used by the Board
to defeat or delay a hostile takeover that is not approved by the incumbent
Board but which the holders of a majority of the shares may deem to be in their
best interests. Faced with an actual or proposed hostile takeover, the Board
could issue Atlantic Shares, in a private transaction, to a friendly party who
might align themselves with the Board in opposing a hostile takeover.
Accordingly, the Exchange Ratio and increase in the number of authorized
Atlantic Shares could be considered to have the effect of discouraging a
takeover of the Company. The directors are not aware, however, of any current
proposals by any party to acquire control of the Company and neither the
Exchange Ratio nor the increase in the number of authorized Atlantic Shares is
intended to be an anti-takeover device.
The Exchange Ratio, itself, does not effect the voting rights or other
rights of the holders of the Shares and will have no material federal tax
consequences to the shareholders of the Company (see "Certain Federal Income Tax
Consequences of the Merger" below). However, because the Exchange Ratio
decreases a shareholders percentage of the total number of Shares authorized for
issuance, any additional Shares issued by the Company may decrease the voting
power of the Company's current shareholders and their ability to defeat certain
transactions to which they are opposed.
Certificates and Fractional Shares. It will not be necessary for
shareholders to surrender their certificates representing Common Stock in
exchange for certificates representing Atlantic Common Stock. Upon consummation
of the Merger, certificates representing any number of shares of Common Stock
will be deemed, for all purposes, to represent one-tenth of the number of Shares
represented on the certificate after the effective date of the Merger.
Commencing as soon as practicable after the Merger, when currently outstanding
certificates of Common Stock are presented for exchange or transfer, new
certificates bearing the name of Atlantic Industries, Inc. will be issued. The
Company will issue fractional Share certificates to any shareholders holding a
number of Shares not evenly divisible by 10, and shareholders holding less than
10 Shares. As of the Record Date there were 4 shareholders of record who owned
less than 10 Shares.
Shares of the Common Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by shareholders who shall have
effectively dissented from the Merger in accordance with the provisions of New
York Law shall not be converted into or be exchangeable for Atlantic Common
Stock, unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost his right to appraisal and payment under New York
Law. If such shareholder shall have failed to perfect or shall have effectively
withdrawn or lost such right, his shares of the Common Stock shall thereupon be
deemed to be converted, at the Effective Time, into the appropriate number of
shares of Atlantic Common Stock. See "Rights of Dissenting Shareholders" below.
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Directors and Officers of the Surviving Corporation. Following the
Merger, the officers and directors of the Company will be the officers and
directors of Atlantic, and each such person will hold the same position or
positions with Atlantic as he held with the Company.
Accounting Treatment of the Merger. In accordance with generally
accepted accounting principles, the Company expects that the Merger will be
accounted for as a reorganization of entities under common control at historical
cost in a manner similar to a pooling of interest. Under this accounting method,
the assets and liabilities of the combining entities will be carried forward at
their recorded historical book values.
Certain Federal Income Tax Consequences of the Merger. The Company's
legal counsel has advised the Company that the Merger will have the following
federal income tax consequences:
(a) Shareholders of the Company (other than those, if any,
who exercise statutory dissenters rights) will recognize neither gain
nor loss upon the exchange of Common Stock solely for Atlantic Common
Stock in the Merger.
(b) Neither the Company nor Atlantic will recognize gain or
loss upon the reincorporation of the Company in Colorado pursuant to
the Merger.
(c) The basis of the Atlantic Common Stock in the hands of a
shareholder (other than any shareholder who exercises statutory
dissenters' rights) immediately after the Merger will be equal in the
aggregate, to the basis of the Shares exchanged.
(d) The holding period of the Atlantic Common Stock received
by a Company shareholder in the Merger will include the period of time
that the Company Common Stock was held by the shareholder, provided
that the Company shareholder holds the Company Common Stock as a
capital asset at the time of the Merger.
(e) In the event Shareholders receive cash in lieu of a
fractional shares, or shareholders who exercise Dissenters' Rights (as
defined herein), such shareholder will recognize capital gain or loss
in an amount equal to the difference between the amount of cash
received and the adjusted basis of the fractional share or shares
surrendered for cash. Those shareholders who choose to exercise their
dissenters' rights in respect of the Merger should consult their own
tax advisors regarding the tax consequences to them of such action.
The foregoing discussion of certain federal income tax consequences is
for general information only and is not tax advice. ALL SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR CONSEQUENCES OF THE MERGER
TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN
LAWS.
Conditions to the Merger; Amendment; Waiver; Termination. The
respective obligations of each party to effect the Merger are subject to the
following conditions:
(a) the approval of the Merger Agreement by shareholders of
the Company holding two-thirds of the outstanding shares of the Common
Stock;
(b) the absence of any material pending or threatened
litigation concerning the Merger or any other transaction contemplated
by the Merger Agreement (unless such condition shall be waived by the
Board);
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(c) statutory dissent and appraisal rights shall not have been
exercised by the holders of more than 5% of the outstanding Common
Stock (unless such condition shall be waived by the Board). See "Rights
of Dissenting Shareholders" below.
The Merger Agreement may be amended and any of its provisions,
including any conditions precedent, may be waived by the Company which is, or
whose shareholders are, entitled to the benefits thereof, at any time prior to
the Effective Time, if, in the sole judgment of the Board, such amendment will
not materially and adversely affect the rights and interest of the Company's
shareholders.
Notwithstanding approval thereof by the shareholders of the Company,
the Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time by the Board, if the Board determines for any reason
that the consummation of the transaction contemplated by the Merger Agreement
would be inadvisable or not in the best interests of the Company and its
shareholders.
Primary Differences Between the Certificate
of Incorporation and Bylaws of the Company
and Atlantic
The primary differences between the Present Certificate and Present
Bylaws and the New Articles and New Bylaws are described below. These
differences are in addition to the differences between the charter documents of
the Company and Atlantic as described under "Certain Charter Document
Provisions" and "PROPOSAL 1-Comparison of New York Law and Colorado Law."
(a) The New Articles authorize the issuance of a total of
50,000,000 Shares of capital stock as follows: 40,000,000 shares of
$.01 par value common stock and 10,000,000 shares of $.01 par value
preferred stock, while the Present Certificate authorizes the issuance
of 25,000,000 shares of $.01 par value common stock and no shares of
preferred stock. See "Description of Atlantic Capital Stock."
(b) The New Bylaws provide that a vote of one-third, rather
than a majority, of the votes entitled to be cast by a voting group are
sufficient to constitute a quorum at a shareholders meeting.
The foregoing description is intended as a summary only and is
qualified in its entirety by reference to the New Articles and the New Bylaws,
which are attached to this Proxy Statement as Appendices B and C, respectively.
Certain Charter Document Provisions
Number of Directors. The New Bylaws provide that the number of
directors will be fixed from time to time by the Atlantic Board. Accordingly,
the Atlantic Board theoretically could prevent any shareholder from obtaining
majority representation on the Atlantic Board by enlarging the Atlantic Board
and filling the new directorships with its own nominees. The Present Bylaws,
however, could be used to achieve the same result since the Board can amend the
Present Bylaws to increase the number of directors at any meeting and fill any
vacancies so created.
Preferred Stock. The Atlantic Board will be authorized to provide for
the issuance of shares of Atlantic Preferred Stock in one or more series and to
fix, by resolution of the Atlantic Board and to the extent permitted by Colorado
Law, the terms and conditions of each series. The Company believes that the
availability of the Atlantic Preferred Stock issuable in series will provide
Atlantic with increased flexibility in structuring possible future financings
and acquisitions and in meeting other future corporate needs. The authorized but
unissued shares of Atlantic Preferred Stock will be available without further
action by Atlantic shareholders, unless such action is required by applicable
law or the rules of any stock exchange on which any class of Atlantic Preferred
Stock may then be listed.
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Although the Board has no present intention of doing so, it could issue
a series of Atlantic Preferred Stock that could, depending on its terms, either
impede or facilitate the completion of a merger, tender offer or other takeover
attempt. For instance, such new shares might impede a business combination
transaction by including class voting rights that would enable the holder to
block such transaction or facilitate a business combination by including voting
rights that would provide a required percentage vote of shareholders. The Board
will make any determination to issue such shares based on its judgment as to the
best interests of the Company and its then existing shareholders. The Board, in
so acting, could issue Atlantic Preferred Stock having terms that would
discourage an acquisition attempt or other transaction that some or a majority
of the shareholders might believe to be in their best interests or in which
shareholders might receive a premium for their stock over the then market price
of such stock. Moreover, shares of Atlantic Common Stock could similarly be
issued (or options thereon could be issued) in a fashion that would discourage
an acquisition attempt, or facilitate an acquisition approved by the Atlantic
Board.
Description of Atlantic Capital Stock
Authorized Capital Stock. Under the New Articles, Atlantic is
authorized to issue 50,000,000 shares of Atlantic Capital Stock, of which
40,000,000 may be shares of Atlantic Common Stock and 10,000,000 may be shares
of Atlantic Preferred Stock. The Company's Present Certificate authorizes the
issuance of 25,000,000 shares of capital stock, all of which are shares of
Common Stock. Other than the 50,000 shares of Atlantic Common Stock the Company
will issue to Mr. Tandet (see "Settlements with Officers and Directors" below),
the Company has no present intention of issuing additional shares of authorized
but unissued shares to any specific entity or person. As previously discussed,
however, the Board does intend to issue additional shares of Common Stock or
Preferred Stock if and when it locates suitable businesses or properties for
investment, which issuances may or may not require shareholder approval.
Approximately 6.8% (including the Shares to be issued to Mr. Tandet) of
the authorized Atlantic Common Stock (or approximately 5% of the total Atlantic
Capital Stock) will be issued and outstanding immediately following the Merger.
No shares of Atlantic Preferred Stock will be outstanding following the Merger.
Atlantic Common Stock. The holders of Atlantic Common Stock will be
entitled to one vote for each share on all matters voted on by shareholders,
including elections of directors, and, except as otherwise required by law or
provided in any resolution adopted by the Atlantic Board with respect to any
series of Atlantic Preferred Stock, the holders of such shares will exclusively
posses all voting power. The New Articles do not provide for cumulative voting
for the election of directors. Subject to any preferential rights of any
outstanding series of Atlantic Preferred Stock designated by the Atlantic Board
from time to time, the holders of Atlantic Common Stock are entitled to such
dividends as may be declared from time to time by the Board from the funds
available therefor, and upon liquidation will be entitled to receive pro rata
all assets of Atlantic available for distribution to such holders. The American
Stock Transfer & Trust Company has been appointed as transfer agent and
registrar for Atlantic Common Stock and Atlantic Preferred Stock.
Atlantic Preferred Stock. The Atlantic Board is authorized to provide
for the issuance of shares of Atlantic Preferred Stock, in one or more series,
and, to the extent permitted by Colorado Law, to fix for each such series such
voting powers, designations, preferences and relative, participating, optional
and other special rights, and such qualifications, limitations or restrictions,
as are stated in a resolution adopted by the Atlantic Board providing for the
issuance of such series.
Preemptive Rights. No holder of Atlantic Capital Stock of any class has
any preemptive right to subscribe to any kind or class of securities of
Atlantic.
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Liability and Indemnification of Officers
and Directors of Atlantic
General. Article VIII of the New Articles limits the personal liability
of directors to Atlantic or its shareholders for monetary damages resulting from
breaches of fiduciary duty as directors. Article VI of the New Bylaws defines
the rights of certain individuals, including both directors and officers, to
indemnification by Atlantic in the event of personal liability or expenses
incurred by them as a result of certain litigation against them.
Article VIII of the New Articles and Article VI of the New Bylaws are
consistent with Colorado Law, which permits Colorado corporations (i) to include
in their certificates of incorporation a provision limiting directors' liability
for monetary damages for breach of the duty of care, and (ii) to indemnify
certain individuals, including directors and officers.
Elimination of Liability in Certain Circumstances. Article VIII of the
New Articles protects Atlantic's directors against personal liability for
monetary damages resulting from breaches of their fiduciary duty of care, except
as set forth below. Under Colorado Law, absent Article VIII, directors could be
held liable for gross negligence in the performance of their duty of care but
not for simple negligence. Article VIII absolves directors from liability for
negligence in the performance of their duties, including gross negligence.
Directors remain liable for breaches of their duty of loyalty to Atlantic and
its shareholders, as well as acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law and transactions
from which a director derives improper personal benefit. Article VIII also does
not absolve directors from liability under Section 7-108- 403 of Colorado Law,
which makes directors personally liable for unlawful dividends or unlawful stock
repurchases or redemptions and expressly sets forth a negligence standard with
respect to such liability.
Indemnification. Under Colorado Law, Atlantic's directors and officers
as well as other employees and individuals may be indemnified against expenses
(including attorneys' fees), judgment, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation-a "derivative action") if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of Atlantic, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe their conduct was unlawful. A similar
standard of care is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred in
connection with defense or settlement of such an action and Colorado Law
requires court approval before there can be any indemnification of expenses
where the person seeking indemnification has been found liable to Atlantic.
Article VI of the New Bylaws provides, among other things, that each
person who was or is made a party to, or is threatened to be made a party to, or
is involved in, an action, suit or proceeding by reason of the fact that he is
or was a director or officer of the legal representative of Atlantic (or is or
was serving at the request of Atlantic as a director, officer, employee or agent
of another entity) shall be indemnified by Atlantic against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of the
Company and not unlawful. In addition, Article VI provides that rights conferred
thereby shall be contract rights and shall include the right under certain
circumstances to be paid by Atlantic for the expenses incurred in defending the
proceedings specified above, in advance of their final disposition. Atlantic may
also, by action of its Board, provide indemnification to its employees and
agents with the same scope and effects as the foregoing indemnification of
directors and officers.
Liability and Indemnification of Officers and Directors of the Company
under the Certificate of Incorporation and Bylaws of the Company. The Present
Certificate, consistent with New York Law, eliminates the personal liability of
directors to the Company or its shareholders for damages for breach of any duty
as a director, except liability for acts or omissions involving bad faith,
intentional misconduct, a knowing violation of law, a personal gain or financial
profit to which the director is not legally entitled, or a violation of Section
719 of
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New York Law (which prohibits certain declarations of dividends, purchases of a
corporation's shares, distributions to shareholders in dissolution of the
corporation, and loans to directors).
Under its Present Bylaws, the Company currently indemnifies any
director or officer of the Company who is made, or threatened to be made, a
party to any action or proceeding, whether civil or criminal. Other employees or
agents of the Company can be similarly indemnified in the discretion of the
Board.
The Company does not believe that Article VIII of the New Articles,
Article VI of the New Bylaws or the applicable provisions of Colorado Law
materially improve the cumulative effect of the indemnification or limitation of
liability available to officers and directors of Atlantic as compared to the
cumulative effect of the indemnification and limitation of liability available
to officers and directors of the Company under the Present Certificate and
Present Bylaws and applicable New York Law.
Rights of Dissenting Shareholders
Under New York Law, dissenting shareholders of the Company will be
entitled to appraisal rights if the Reincorporation Proposals or LPPL Proposals
are consummated. Any shareholder who desires to exercise such appraisal rights
must strictly comply with the requirements of Section 623 of New York Law;
failure to so comply may result in the loss of such shareholder's appraisal
rights. A copy of Section 623 of New York Law is attached hereto as Appendix D,
and shareholders are referred to Appendix D for a full statement of its
provisions.
In general, Section 623 requires a shareholder seeking to enforce
appraisal rights to:
(a) file with the Company, at or prior to the Meeting, a
written objection to the Reincorporation Proposals and the LPPL
Proposals including a statement that the shareholder intends to demand
payment for his shares if the Reincorporation Proposals and the LPPL
Proposals are effected;
(b) vote against or abstain from voting on the Reincorporation
Proposals and the LPPL Proposals; and
(c) file with the Company, within 20 days after receipt of a
notice from the Company stating that the Reincorporation Proposals and
the LPPL Proposals were approved by the Company's shareholders, a
written notice of election to exercise appraisal rights in compliance
with Section 623(c), which notice shall terminate all of such
shareholder's rights as a shareholder except only to receive the fair
value of the shares.
Upon receipt of the shareholder's Section 623(c) notice, in the event
that the Company and the shareholder do not agree on the fair market value of
such shareholder's Company Common Stock, the Company must, pursuant to Section
623(h), institute a special court proceeding to determine the rights of the
dissenting shareholder and to fix the fair value of his shares of the Company
Common Stock. Although the management of the company intends to institute such
special proceedings when required, if the Company should fail to institute such
a proceeding within the time period fixed under Section 623(h), the dissenting
shareholder may then institute such proceedings.
A vote against the Reincorporation Proposals or the LPPL Proposals will
not satisfy the notice requirement under New York Law. Any shareholder wishing
to enforce his rights under Section 623 must file a separate objection to the
Merger and a separate notice of election to exercise appraisal rights, in the
manner and within the time frames, specified in Section 623. All such notices
may be sent to the Company at 38 South Audley Street, Mayfair, London W1Y 5DH,
England.
FAILURE TO COMPLY WITH ANY OF THE PROCEDURAL REQUIREMENTS OF SECTION
623 MAY RESULT IN A TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER SECTION 623.
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Vote Required and Management Recommendation
Both Proposal 1 and Proposal 2 must be approved by the affirmative vote
of the holders of at least two-thirds of the outstanding Shares in order for
Proposal 2 to be adopted. If such a vote is not obtained, then the Merger
Agreement will be terminated, and the Company will remain incorporated in New
York.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2 TO APPROVE
THE TERMS OF THE MERGER AGREEMENT
PROPOSAL NO. 3 AND PROPOSAL NO. 4
AUTHORIZATION FOR BOARD TO SELL OR
DISSOLVE LPPL CORP.
General
Section 909 of New York Law provides, in relevant part, that a sale or
other disposition of all or substantially all of the assets of a corporation
shall be authorized by the board of directors and submitted to a vote of the
shareholders for their approval. Section 909 further provides that the
shareholders shall approve such sale or disposition and "may fix, or may
authorize the board to fix, any of the terms and conditions thereof and the
consideration to be received by the corporation thereof." Although it is not
free from doubt whether Section 909 applies to Proposals 3 and 4, and,
accordingly, whether shareholder approval is required, the Board has determined
to act in accordance with its terms. Accordingly, the Board is requesting that
the Shareholders approve the following proposal granting the Board the authority
to (i) sell all or substantially all of the common stock of LPPL Corp. to an
independent third-party, or (ii) vote, as the sole shareholder of LPPL Corp. to
dissolve LPPL Corp.
(collectively, the "LPPL Proposals").
In the event the shareholders approve the Reincorporation Proposals and
the LPPL Proposals, LPPL Corp. will be dissolved or sold after the Company
becomes a Colorado corporation and the subsequent sale or dissolution could be
subject to Colorado Law. The Company believes that the LPPL Proposals should be
governed by New York Law as upon consummation of the Merger, by operation of
law, all rights, liabilities and obligations of the Company will be transferred
and assumed by Atlantic. In an effort to avoid any future legal issues in this
regard, however, a vote in favor of the LPPL Proposals will also be considered
your consent to the Board for the Board to vote to approve the LPPL Proposals.
If either Proposal 3 or Proposal 4 is not approved by two-thirds of the
Shares outstanding, neither Proposal 3 nor Proposal 4 will be adopted. The
Company's officers and directors, who together hold 26.3% of the Common Stock,
have indicated that they intend to vote for the LPPL Proposals. Whether
Proposals 3 and 4 are approved or defeated, the Board may reconsider whether to
proceed with the LPPL Proposals.
Under New York Law, dissenting shareholders of the Company will be
entitled to appraisal rights if the LPPL Proposals are consummated. See
"PROPOSAL 2-Rights of Dissenting Shareholders" and Appendix D, for a discussion
of the procedures and requirements for exercising such rights.
In the event the Company's shareholders vote not to approve the LPPL
Proposals, but do approve the Reincorporation Proposals, the Company could
resubmit the LPPL Proposals to the shareholders in which case, under Colorado
law, a vote of a majority, and not two-thirds, of the total outstanding shares
would be required for approval.
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Background
On July 9, 1965, A. Joseph Tandet acquired the worldwide stage,
television and radio rights to the literary work entitled "The Little Prince" by
Antoine de Saint-Exupery and referred to herein as the "Work." Contemporaneously
therewith, by agreement with Solifilm, S.A. and TLP Productions, Ltd., Mr.
Tandet also acquired the exclusive, worldwide recording, motion picture,
commercial and merchandising rights to the Work. All of the foregoing rights
were assigned to the Company by Mr. Tandet in 1980. Upon consummation of the
Reverse Acquisition (discussed below under "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS"), the Company transferred its theatrical operations and assets
(substantially consisting of the Work) to LPPL Corp, its wholly owned
subsidiary. LPPL Corp. maintains its headquarters at the office of its
president, Mr. A. Joseph Tandet, at 555 Fifth Avenue, New York, NY 10017.
On September 30, 1992, LPPL Corp. authorized two independent
theatrical producers, John Scoullar and Rick Cummins, to produce another new
musical stage production based upon the Work, in New York by December 31, 1993,
geared for an adult audience (the "Scoullar-Cummins Production"). The
Scoullar-Cummins production opened on October 17, 1993 at the 28th Street
Theater in New York City and ran through December 1993. During the fiscal year
ended December 31, 1993, LPPL Corp. derived gross revenues from this production
in the amount of $2,000 by way of an advance payment against royalties. No
further royalties have been paid to date. As a result of the foregoing, Messrs.
Scoullar and Cummins claim to have obtained from LPPL Corp. its right to produce
theatrical presentations of the Work in the United States and Canada. LPPL Corp.
has instituted litigation with respect to such dispute.
Litigation with Gallimard and the Saint-Exupery Family. On February 6,
1992, LPPL Corp. entered into an agreement with Gallimard and the Saint-Exupery
family in settlement of litigation brought by Gallimard and the Saint-Exupery
family against LPPL Corp. in 1990. The settlement agreement provided for, among
other things, the preservation of certain television production rights to the
Work held by Pontaccio S.P.A., an Italian television production company
("Pontaccio"), payment to LPPL Corp. of an aggregate amount of $200,000 (the
"Settlement Fee") in six payments, a royalty to LPPL Corp. of three percent (3%)
of gross revenues derived from the proposed Pontaccio television production, and
LPPL Corp.'s relinquishment of all of its rights to the Work except for the
following:
(i) the exclusive right to produce theatrical presentations of The
Little Prince in the United States of America and in Canada in the
English language; and
(ii) the non-exclusive right to produce theatrical representations of
The Little Prince in Canada in the French language subject to the prior
authorization of Gallimard.
In 1992, Pontaccio paid $150,000 of the $200,000 Settlement Fee. During
the fiscal year ended December 31, 1993, Pontaccio paid an additional $50,000 in
respect thereof. In addition, Pontaccio remains obligated to pay LPPL Corp. a 3%
television production royalty in the event that it mounts a television
production of the Work. Plans for such a production currently include a budget
of approximately $6,000,000. However, the Company is unable to state whether, if
ever, such a production will be mounted. To date, Pontaccio has not generated
any revenues from such proposed television production, and no royalty payments
have been made to LPPL Corp.
The Boys Next Door. In November 1987, in a joint venture with Duet
Productions Inc., LPPL Corp. produced an off-Broadway stage production of "The
Boys Next Door" by Tom Griffen. The production was a clear critical, but not a
financial, success. The production did however run for more than 70 performances
in New York, as a result of which, LPPL Corp. became entitled to certain
subsidiary rights to subsequent performances of the production. During the
fiscal year ended December 31, 1994, an amount of $4,500 was accrued in respect
of such rights, which amount was subsequently paid to LPPL Corp. in March of
1995. There is no assurance that significant additional revenue, if any, will be
earned by LPPL Corp. in connection with this property.
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Oil City Symphony. LPPL Corp. was an associate producer with Duet
Productions Inc. of a production of "Oil City Symphony" which was produced
off-Broadway in New York City in October 1987 and which ran until April 1989.
LPPL Corp. continues to hold certain touring rights to such production, but to
date has realized no revenues therefrom. There can be no assurance that LPPL
Corp. will ever realize revenues from these touring rights.
Film Rights. On October 28, 1983, LPPL Corp. acquired from
Ceskoslovensky Filmexport ("CF") the sole and exclusive rights, for a period of
15 years, in the territory of the United States, for the economic exploitation
and public exhibition in cinemas of thirteen 35mm and 16mm feature length films
made in Czechoslovakia. In exchange therefor, the Company issued 850,000 shares
of its common stock to CF, valued at $1.25 per share. LPPL Corp. has never
received any revenues from the exhibition of these films, and during the fiscal
year ended December 31, 1993, the distributor of such films advised LPPL Corp.
that such rights are worthless. LPPL Corp. does not expect to derive any
economic benefit from its rights to these films.
Reasons for the LPPL Transactions
Disadvantages of LPPL Proposals. The sale or dissolution of LPPL Corp.
would result in the loss of the Company's only form of revenue resulting in the
Company essentially constituting a shell corporation. To the extent the
Reincorporation Proposals are not approved, the Company would likely be left
without any means to derive revenue in the future. The same result would occur
if the Reincorporation Proposals are approved, but the Company is unable to
locate potential business for acquisition.
Advantages and Reasons for Board's Recommendation. In analyzing the
direction of the Company's future growth, the Board has recognized that the
production of stage productions on or off-Broadway or in regional or other
theaters is extremely speculative and that only a small percentage of theatrical
productions ever make a profit. Revenues from LPPL Corp.'s theatrical production
business are dependent on a variety of factors over which it has no control,
including critical and consumer reaction, competition from other productions and
the advertising and publicity which LPPL Corp. and parties external to LPPL
Corp., such as theatrical reviews, etc. provide for LPPL Corp.'s productions.
Audience appeal depends, among other things, upon unpredictable critical reviews
and changeable public tastes, factors which cannot be reliably ascertained in
advance and over which LPPL Corp. has no control. LPPL Corp.'s principal
competitive disadvantage in this field has been, and the Board believes, will
continue to be, its extremely limited capital resources. As at the date hereof,
the Board does not foresee any increase in the amount of such capital available
to LPPL Corp. It is therefore unable to state at this time whether it will ever
have sufficient capital to enable it to compete effectively, if at all, in the
area of theatrical production.
As discussed under "GENERAL OVERVIEW, BACKGROUND AND REASONS FOR THE
PROPOSALS" above, the Board intends to focus the Company's efforts on the
acquisition of service and manufacturing businesses and commercial real estate
properties. Given the change in emphasis in the Company's current operations and
LPPL Corp.'s litigious history and uncertain profitability the Board believes it
is in the Company's best interest to relinquish its interest in LPPL Corp. at
this time. In addition to enabling the Company's management to focus its efforts
on the acquisition of potential businesses or properties, the LPPL Proposals
will also improve the overall financial condition of the Company.
For example, although LPPL Corp. currently provides 100% of the
Company's revenues, ($7,029 and $14,125 in 1994 and as of September 30, 1995,
respectively) it also accounted for 57% and 33% of the Company's operating costs
in 1994, and as of September 30, 1995, respectively, which resulted in losses
from continuing operations before taxes of LPPL Corp. of $50,729 in 1994 and
$14,902 as of September 30, 1995. The LPPL Proposals would result in the Company
decreasing its overall liabilities by approximately $146,000 while only
decreasing the Company's assets by approximately $12,000. Such a reduction will
improve the overall financial condition of the Company, which the Board believes
will aid the Company in its attempts to become profitable in the future. For
additional information regarding the Company's financial statements see
"Selected Financial Information" and "INDEX TO FINANCIAL STATEMENTS" below.
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Description of LPPL Proposals
In approving the LPPL Proposals, the Shareholders will grant the Board
authority to select the method in which the LPPL Proposals will occur. In
determining the specific manner in which to effectuate the LPPL Proposals, the
Board will act in accordance with its legally imposed fiduciary duties and
select that method which provides the greatest value to the Company and its
shareholders. The Board contemplates that, under either method, the LPPL
Proposals will be completed within a date not exceeding three months from the
date of the Meeting.
To date, the Board has not engaged in any material discussions or
negotiations or any arrangement, understanding or contractual commitment
respecting the sale of LPPL's common stock with any party or other entity and
there can be no assurance that the Board will be able to reach an agreement with
a third-party in the future. If the Board is unable to reach a satisfactory
agreement with a third-party, the Board would likely vote to dissolve LPPL Corp.
Tax Considerations. In general, a corporate tax, if any, would be
payable by the Company based upon the difference between (a) the value of the
consideration received for the Shares of LPPL Corp. and (b) the Company's
adjusted basis in the common stock of LPPL Corp. The Company does not expect
that either the sale of LPPL Corp.'s common stock or its dissolution would
result in funds sufficient for the Company to recognize a gain.
Loss of Tax Consolidation Benefits. Upon its sale or dissolution, LPPL
Corp. will no longer be included in the Company's consolidated tax return. The
LPPL Proposals, therefore, may have a negative impact on the Company's future
net income. The actual amount of such potential negative impact will depend on
the Company's future performance.
Regulatory Requirements. The Company is not aware of any material
federal, provincial or state laws or any regulatory requirements that have not
been met or approvals that have not been obtained in connection with the LPPL
Proposals.
PROPOSAL NO. 3
Sale of Shares of LPPL Corp. to Independent Third-Party. Under this
method, the Board will attempt to negotiate the purchase of the common stock of
LPPL Corp. with an independent third-party. To date the Board has not located
any potential purchasers or entered into any material negotiations of
contractual agreements regarding the same. There can be no guarantee that the
Company will be able to locate potential purchasers in the future.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 3 GRANTING THE BOARD
AUTHORITY TO SELL THE COMMON STOCK OF LPPL CORP.
PROPOSAL NO. 4
Dissolution of LPPL Corp. Under this method, the Board, as the sole
shareholder of LPPL Corp. will vote to dissolve LPPL Corp. Upon dissolution, and
after adequate provisions are made for any outstanding debts of LPPL Corp., the
remaining assets, if any, of LPPL Corp. will be distributed to the Company.
After dissolution, the Board does not expect that LPPL Corp. will have any
available assets left for distribution to the Company. The Company does not
anticipate that it will recognize any gain or loss as a result of the sale of
LPPL Corp.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 4 GRANTING THE BOARD
AUTHORITY TO DISSOLVE LPPL CORP.
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SELECTED FINANCIAL DATA
The financial data set forth below are derived from the consolidated
financial statements of the Company, which were audited by Moore Stephens, LP
independent certified public accountants, for the fiscal years ended December
31, 1994, 1993 and 1992. The selected financial data set forth below does not
purport to be complete and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operation" and the
financial statements, related notes and report of independent auditors, under
"INDEX TO FINANCIAL STATEMENTS" included herein. Specifically, the comparability
of the selected financial data is materially affected by the sale of Tyne River
Properties, plc. on March 29, 1994. This information is discussed in greater
detail under "Management's Discussion and Analysis of Financial Condition and
Results of Operation-Results of Operations" and Notes 1 and 5 to the audited
financial statements (see "INDEX TO FINANCIAL STATEMENTS").
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data
Continuing Operations
Net Sales $ 7,029 $ 12,726 $ 300 $ -- $ --
Operating costs (120,434) (189,594) (169,538) -- --
Other income 663 698 117 -- --
Net Loss (94,742) (176,170) (169,121) -- --
Earnings (loss) per common share
(cents) (0.56) (1.26) (1.21) -- --
Discontinued Operations
Net Sales $ 524,297 $ 3,091,265 $ 1,719,746 $ 1,557,517 $ 75,172
Net (Loss) Income (37,450) (2,195,149) 162,565 (21,858) (179,486)
Earnings (loss) per common share
(cents) (0.22) (15.68) 1.16 (0.16) (1.28)
Weighted Average of shares
outstanding 16,711,564 13,999,236 13,999,236 13,999,236 13,999,236
Balance Sheet Data
Total Assets $ 51,681 $ 3,762,762 $ 8,689,480 $ 9,777,699 $ 4,915,256
Current liabilities 214,145 4,202,881 6,730,698 2,688,283 2,135,607
Non-current liabilities -- -- -- 4,739,209 1,236,327
Shareholders' equity (deficit) (162,464) (525,428) 1,867,627 2,350,207 1,543,322
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
On November 16, 1992 (the "Acquisition Date") the Company acquired all
of the issued and outstanding capital stock of Tyne River Properties plc, a
company incorporated in England ("TRP"), from the holders thereof in exchange
for eleven million, eight hundred ninety-nine thousand, two hundred thirty-six
(11,899,236) newly issued shares of the Company's common stock. The scale of
this acquisition was such that the activities of TRP formed the major part of
the Company's activities until the sale on March 29, 1994. As required by United
States
24
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accounting standards, the financial statements for the years ended December 31,
1993 and December 31, 1994, have been prepared to treat TRP as the parent
company with balance sheet data and results of operations of Little Prince
Productions included only with effect from the Acquisition Date. All the
comparative financial information for periods prior to the Acquisition Date
through December 31, 1994 therefore relate solely to TRP and its subsidiaries.
The balance sheets also reflect the effects of accounting for the acquisition as
a merger (purchase type).
Balance sheet amounts originally denominated in United Kingdom sterling
have been translated into U.S. dollars using the veer-end rate of exchange.
Operational results originally denominated in United Kingdom sterling have been
translated into U.S. dollars using the average annual rate of exchange. All
business transactions effected by TRP are made in United Kingdom sterling.
Fluctuations in foreign exchange rates could have, and in the past have at
various times had, either negative or positive impacts on the Company's balance
sheet and results of operations. The Consolidated Statement of Shareholders'
Equity included in the financial statements, which form a part of this report,
shows the impact of changes in the dollar/sterling exchange rate on the value of
TRP's assets and results of operations over this and prior periods. Such
Statement for the year to December 31, 1994 shows no exchange gain or loss on
translation. For the years ended December 31, 1993 and December 31, 1992, the
Company had an exchange loss on translation of $21,736 and $49,122,
respectively.
Results of Operations
The Company's operating results are summarized in "SELECTED FINANCIAL
DATA" above. Generally, the decrease in the Company's net loss from discontinued
operations in 1994 resulted from the Company's decision to sell TRP in part due
to the additional decrease in the value of the A19 Property (a property
previously held by TRP). The sale of TRP resulted in a gain of $287,428. The
increase in the Company's net loss from discontinued operations from 1992 to
1993 was substantially the result of cash flow problems of TRP that were caused
and exacerbated by a number of factors, including, but not limited to, a severe
economic recession in the UK, which had a significant adverse effect on the UK
real estate property markets, the cessation of rental revenues from a major
property owned by TRP, the refusal of TRP's major lending bank to extend further
credit, and the unexpected demand by a major creditor of TRP for payment in full
of a major outstanding liability, and the completely unanticipated actions taken
by such creditor in issuing a petition to the Court to dissolve TRP's wholly
owned subsidiary, Exchange Buildings, Limited ("EBL") and to liquidate its
assets. As a result of the foregoing the Company was forced to reduce the value
of the Exchange Building by $970,000 and the A19 Property by $120,000. In
addition, the 1992 Net Loss was reduced by the insurance proceeds on the
destination of property which gave rise to an exceptional profit of $1,398,186.
Following discontinuance of the real estate development activities,
the Company's continuing business comprised of its Theatrical Operations only
and the results have been restated accordingly. All of this income derives from
arrangements whereby the Company receives revenue dependent on the successful
staging of theatrical productions. If the theatrical productions are not
successful then the Company's revenue is severely reduced. The timing of receipt
of the income is also dependent on the timing of staging the theatrical
productions and can therefore fluctuate year on year. Whereas income was
received during the 3 years ended December 31, 1994 there is no guarantee that
income will continue to be received into the future. Revenue is not sensitive to
changes in prices nor the effects of inflation.
Income for the quarter ending September 30, 1995, arose from fees
received from the licensing of various theatrical productions. This income did
not reflect any change in the business of the Company but typified the nature
and timing of the income generated.
Throughout the nine months ended September 30, 1995, management's
primary task has been to deal with the preparation and completion of the various
financial and regulatory documentation which the Company has been required to
file, some of which had been overdue. All filings are now up to date. The
majority of the operating costs of $89,592 incurred in the nine months ended
September 30, 1995 related specifically to the audit, accounting, secretarial
and legal costs associated with the preparation of the aforementioned
documentation. Included within
25
<PAGE>
the total for operating costs for the quarter to September 30, 1995 is a charge
of $13,930 by way of a provision against the loans due from a former partner in
a joint venture in order to reflect management's doubts as to their full
recoverability.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
Dec.31, Change Dec. 31, Change Dec. 31, Change Dec. 31,
1994 1993-1994 1993 1992-1993 1992 1991-1992 1991
---- --------- ---- --------- ---- --------- ----
(in 000s) (in 000s) (in 000s) (in 000s) (in 000s) (in 000s) (in 000s)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents 5 -25 30 -26 56 -199 255
Investment in US Government 11 -9 20 +20 -- -- --
Bond Fund
Prepaid expenses and taxes 1 -27 28 +12 16 -11 27
Other debtors 24 -100 124 -2,022 2,146 +1,559 587
Development Properties -- -3,548 3,548 -2,875 6,423 -2,484 8,907
------ ------- ------ ------- ------ ------- ------
Total Current Assets 41 -3,709 3,750 -4,891 8,641 -1,135 9,776
OTHER ASSETS 11 -2 13 -35 48 47 1
------ ------- ------ ------- ------ ------- ------
TOTAL ASSETS 52 -3,711 3,763 -4,926 8,689 -1,088 9,777
====== ======= ====== ======= ====== ======= ======
LIABILITIES AND
SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Trade Creditors 159 -585 744 -550 1,294 -137 1,431
Accrued taxes -- -- -- -430 430 +423 7
Mortgage loan -- -2,517 2,517 -1,449 3,986 +3,966 --
Bank loan -- -723 723 -17 740 -174 914
Other current liabilities 55 -164 219 -82 301 +90 211
------ ------- ------ ------- ------ ------- ------
Total current liabilities 214 -3,989 4,203 -2,528 6,731 +4,168 2,563
NON CURRENT LIABILITIES -- -- -- -- -- -4,739 4,739
------ ------- ------ ------- ------ ------- ------
7,302
TOTAL LIABILITIES 214 -3,989 4,203 -2,528 6,731 -571
Minority Shareholders Interests -- -85 85 -6 91 -34 125
Total shareholders equity (162) 363 (525) -2,392 ,867 -483 2,350
------ ------- ------ ------- ------ ------- ------
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY 52 -3,711 3,763 -4,926 8,689 -1,088 9,777
====== ======= ====== ======= ====== ======= ======
</TABLE>
The above table indicates the line by line changes in the financial
position of the Company over the 3 years ended December 31, 1994, 1993 and 1992.
Throughout the period, albeit without success, the Company sought to raise
additional liquidity through the issuance of additional shares of its common
stock in order to further the property development segment of its business. This
business was characterized by large fluctuations in working capital requirements
arising from the relatively long duration of projects. In the initial stages,
projects would absorb significant cash as properties were under construction.
The Company would receive a return on its investment when the completed
properties were sold. Given the lack of success in raising funds through the
issuance of common stock, the Company had to substantially increase its
borrowings. By December 31, 1991 completed properties were becoming available
for sale and throughout the course of the following 3 years sales were made.
Notwithstanding the Company's investment of additional funds to complete further
properties, the level of sales was such that a substantial reduction in the
level of working capital invested in development properties was seen during 1992
and 1993. The funds so released were primarily used in those years to reduce the
level of mortgage loan outstanding together with related trade creditors.
26
<PAGE>
A major fire within one of the development properties under
construction in early 1992 led to an insurance claim totalling $1.86 million
which was included within the balance sheet at December 31, 1992 and paid during
1993. This accounts for the major part of the increase and subsequent decrease
in the totals for Other debtors between December 31, 1991, 1992 and 1993.
On March 29, 1994, the Company disposed of the whole of its interest in
the share capital of TRP. The effect of this disposal on the line items above is
set out in detail in Note 16 to the Company's Financial Statements.
On August 22, 1994, the Company reached agreement with its Officers and
Directors and a firm of professional advisors to issue shares of its Common
Stock in full and final settlement of any claims they may have had against the
Company. A total of 7,750,000 shares of common stock were issued in settlement
of liabilities totalling $462,656. On the same day, an additional 3,250,000
shares of common stock were issued for $32,500 to Riparian Securities Limited
who, in addition to acquiring the shares in the common stock, had indicated
their intention to give short term financial support to the Company throughout
the period of reorganization. The combined effect of both of these transactions
was to improve the liquidity of the Company by $495,146.
In order to reduce outstanding liabilities relating to legal, audit and
secretarial services and also to meet the excess of continuing operating costs
of the Company over income, including those costs associated with meeting the
regulatory requirements of the Company, $10,217 was realized from the sale of
investments at book value during the nine months ended September 30, 1995, of
which $717 was realized in the three months ended September 30, 1995. In
addition, in the nine months ended September 30, 1995, Patchouli advanced fund
by way of loans to the Company totalling $78,808 of which $12,548 was advanced
in the three months ended September 30, 1995. Patchouli has continued to advance
further funds since that date.
The Company had no material commitments for capital expenditure at any
of the years ended December 31, 1994, 1993 and 1992 or for the period ending
September 30, 1995.
Future Liquidity
Management does not believe that the Company has the ability to raise
adequate resources from its existing revenue operations. The Company is
therefore dependent in the short term from continued loans from Patchouli and in
the longer term upon increasing its authorized share capital in order to acquire
through the issue of additional shares in its common stock a suitable business
to satisfy the minimum financial criteria for inclusion in the NASDAQ System, as
discussed above.
27
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of the Record Date
regarding beneficial ownership of shares of Common Stock by each person who is
known by the Company to own beneficially more than 5% of the Common Stock.
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
------------------- -------------------- ----------------
Patchouli Foundation 6,240,402(1) 25%
c/o Von Erlach & Partners Strasse 7,
Postfach 4088
8022 Zurich
Adrian P. Kirby 6,240,402(2) 25
38 South Audley Street
Mayfair, London
W1Y 5DH, England
Terence G. Galgey 2,250,000(3) 9
Little Lodge
Great Bardfield
Braintree, Essex CM7 4QB
England
John L. Milling 1,250,000(4) 5
115 River Road, Bldg. 12
Edgewater, NJ 07020
Frances Katz Levine 1,250,000(4) 5
115 River Road, Bldg. 12
Edgewater, NJ 07020
- ------------------
(1) Includes 3,250,000 shares issued to RSL pursuant to the RSL agreement and an
aggregate of 2,990,402 shares, transferred to RSL by Messrs. Peacock and
Chapman, for the nominal consideration $.0001 per share. All of such shares were
transferred by RSL to the Patchouli Foundation on January 17, 1995. Both RSL and
the Patchouli Foundation are under the control of Adrian P. Kirby and such
transfer was therefore deemed not to involve a change in beneficial ownership.
See Footnote 2 to this Table.
(2) Includes 6,240,402 shares beneficially owned by the Patchouli Foundation;
Mr. Kirby may be deemed to be a beneficial owner of such shares through the
investment and voting powers which Mr. Kirby has over such shares through his
position as attorney-in-fact for the administrator of the Patchouli Foundation.
(3) Includes 1,250,000 shares issued in September 1994 in partial satisfaction
of unpaid fees for legal services rendered and unreimbursed expenses incurred.
(4) Issued in September 1994 in partial satisfaction of unpaid fees for legal
services rendered and unreimbursed expenses incurred.
28
<PAGE>
Security Ownership of Management
The following table sets forth information with respect to the share
ownership, as of the Record Date, of (i) each director of the Company; (ii) each
executive officer of the Company, and (iii) all directors and executive officers
as a group.
Name Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class(2)
------------------- -------------------- ----------------
Peter N. Chapman 325,000 1.3
Adrian P. Kirby 6,240,402(1) 25
Robert D. Evans 0 0
All directors and officers 6,565,402 26.3
as a group (3 persons)
- ------------------
(1) Includes 6,240,402 shares beneficially owned by the Patchouli Foundation;
Mr. Kirby may be deemed to be a beneficial owner of such shares through the
investment and voting powers which Mr. Kirby has over such shares through his
position as attorney-in-fact for the administrator of the Patchouli Foundation.
(2) Based upon 24,999,236 shares of common stock, $.01 par value, issued and
outstanding as of the Record Date.
CHANGE IN CONTROL
Riparian Securities Limited ("RSL")
On August 22, 1994, the Company entered into an agreement (the "RSL
Agreement") with Riparian Securities Limited ("RSL"). RSL is a company
incorporated and registered in England (Company No. 2855251). Its registered
office is located at 38 South Audley Street, Mayfair, London W1Y 5DH, England.
RSL is engaged in the business of real estate investment and management,
principally in the area encompassing London and the Southwest of England.
The RSL Agreement principally provided for:
(I) a loan by RSL to the Company of GB(pound)25,000, to be used to
satisfy financial, tax and regulatory obligations of the
Company;
(ii) the sale by the Company to RSL of 3,250,000 shares of original
issue common stock of Company at a price of $.01 per share in
conjunction with the sale by Peter N. Chapman and William J.
Peacock to RSL of an aggregate of an additional 2,990,402
shares for the nominal price of $.0001 per share;
(iii) the resignation of four of the five then present directors of
the Company, pursuant to which Terence G. Galgey, William J.
Peacock, A. Joseph Tandet, and Carl Kuehner resigned as
directors of the Company, which resignations became effective
as of October 1, 1994;
(iv) the replacement of the resigning directors by two designees of
RSL, Adrian P. Kirby and Christopher N.C. Jones, and the
reduction in the size of the Board from five to three persons;
and
(v) the resignations of Messrs. Galgey, Peacock, Tandet, and
Kuehner as officers of the Company, which resignations became
effective as of October 1, 1994.
29
<PAGE>
The closing of the RSL Agreement took place on September 9, 1994. As a
result of the RSL Agreement, RSL acquired 25% of the issued and outstanding
Common Stock of the Company. The newly constituted board of directors took
office on October 1, 1994, ten days after a Notice to Shareholders, prepared in
accordance with Rule 14f-1 of the Exchange Act was mailed to the Company's
shareholders. Thereafter, Adrian P. Kirby was appointed as Chairman and Chief
Executive Officer of Company and Christopher N.C. Jones was appointed as its
Executive Vice President. Prior to their taking office, neither Mr. Kirby nor
Mr. Jones held any offices, employments, directorships or other affiliations
with the Company. Peter N. Chapman continued to hold the positions of Secretary,
Treasurer and a director of the Company. On February 15, 1995, Mr. Jones was
removed for cause by the remaining members of the board and Robert D. Evans was
appointed to fill the vacancies created by Mr. Jones's removal.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions and Business
Relationships with Management
Service and Employment Agreements. Following the November 16, 1992
reverse acquisition (the "Reverse Acquisition") whereby the Company acquired
100% of the issued and outstanding common stock of TRP, the Company entered into
agreements, directly or indirectly,(1) with A. Joseph Tandet and the four other
executive officers who were appointed as executive officers of the Company
pursuant to the Reverse Acquisition. Such agreements provided for services to,
or employment by, the Company.
1. A service agreement, dated November 16, 1992, with Galgey
Financial Services Limited CGFSL") providing for the services of its president,
Terence G. Galgey (the "Galgey Service Agreement");
2. A service agreement, dated November 16, 1992, with Oform
Associates Limited ("Oform") providing for the services of its executive vice
president, William J. Peacock (the "Peacock Service Agreement");
3. A service agreement, dated November 16, 1992, with Chapman &
Chapman ("C&C") providing for the services of its treasurer and secretary, Peter
N. Chapman (the "Chapman Service Agreement"); and
4. An employment agreement, dated October 21, 1992, with A.
Joseph Tandet providing for Mr. Tandet's employment as the vice president of the
Company and as president of LPPL Corp. (the "Tandet Employment Agreement" and
collectively, the "Service Agreements").
- -------------------
(1) The Company's respective Service Agreements with GFSL, Oform, and C&C each
of the foregoing acknowledged to the Company that Messrs. Galgey, Peacock or
Chapman, as appropriate, was its exclusive employee, that each such individual's
services were being furnished to the Company as an independent contractor, and
that accordingly, to the extent that all applicable laws and regulations
allowed, the responsibility of complying with all statutory and legal
requirements relating to each such respective individual as an employee, would
be discharged wholly by GFSL, Oform or C&C, as applicable. The Service
Agreements further provided that in the event any person should seek to
establish any liability or obligation upon the Company on the grounds that any
of the respective individuals is an employee of the Company, GFSL, Oform or C&C,
as appropriate, would indemnify the Company and keep it indemnified in respect
of any liability or obligation and any related costs, expenses or other losses
which the Company incurred in connection therewith.
Settlements With Officers and Directors
The Company was unable in varying degrees to meet its financial
obligations under the Service Agreements. As a result, the Company accrued
contractual liabilities arising from unpaid salaries and unreimbursed expenses.
In connection with the RSL Agreement, on August 22, 1994 the Company entered
into separate settlement
30
<PAGE>
agreements with the contracting parties under the respective service and
employment agreements. On October 3, 1994 these agreements were completed. In
connection with the RSL stock acquisition and change in management, Messrs.
Galgey, Peacock, Chapman, Tandet and Kuehner entered into separate settlement
and release agreements with the Company whereby they accepted, in full and final
settlement of any claims they may have had against the Company respecting
accrued but unpaid compensation and reimbursable expenses, shares of the
Company's common stock, valued at approximately $.06 per share, as follows:
Amount of Number of
Name Liability Shares Issued
- ------------------ --------- -------------
Terence G. Galgey $83,352 1,250,000
William J. Peacock 98,103 1,575,000
Peter N. Chapman 100,648 1,625,000
Carl Kuehner 46,354 800,000
In addition, in consideration of Mr. Tandet's agreeing to render
extensive legal services in connection with certain litigation matters of the
Company and its subsidiary LPPL Corp., the Company agreed to issue 500,000
shares to Mr. Tandet, at such time as the Company's certificate of incorporation
is amended so as to increase its authorized capital stock.
Should the shareholders approve the Reincorporation Proposals, the
Company will issue 50,000 shares of Atlantic Common Stock in lieu of the 500,000
shares of the Company's Stock in accordance with the Exchange Ratio.
Loan From Affiliate
During the year ended December 31, 1994 and the period subsequent
thereto, the Patchouli Foundation has made loans to the Company to cover costs
and expenses incurred in connection with various corporate activities, including
without limitation, legal, accounting and filing fees incurred in connection
with the preparation of the Company's annual reports on Forms 10-K for the years
ended December 31, 1993 and 1994. As of September 30, 1995, such loans aggregate
to approximately $79,000.
Relationship Between the Company and Atlantic Properties, Ltd.
On February 15, 1995, the Company's current officers and directors,
founded Atlantic Properties, Ltd., a Delaware corporation, for the purpose of
engaging in business of acquiring, developing, re-developing, owning, selling,
leasing and managing residential leisure and other types of real estate
properties. In consideration of the services rendered and unreimbursed expenses
incurred in connection with its organization, Atlantic Properties, Ltd. issued
105,000 shares, constituting approximately 2.5% of its total issued and
outstanding common stock to the Company. On March 30, 1995, Atlantic Properties,
Ltd. filed a registration statement on Form S-11 with the Securities and
Exchange Commission (SEC File No. 33-90790), which was declared effective on
November 11, 1995. The 105,000 shares owned by the Company were included therein
to be registered under the Securities Act of 1933, as amended, for distribution,
on a pro rata basis, to the holders of Company's common stock of record, on a
date to be determined, at the rate of one share of common stock for every two
hundred thirty-eight (238) shares of the Company's Common Stock, without any
Consideration being paid by such shareholders. Notwithstanding the foregoing,
any person who holds Shares of the Company as of the initial record date in an
amount of less than two hundred thirty-eight (238) will receive one share of
Atlantic Properties, Ltd. common stock.
SOLICITATION OF PROXIES
This solicitation is being made by mail on behalf of the Board, but may
also be made without additional remuneration by officers or employees of the
Company by telephone, telegraph, facsimile transmission or personal
31
<PAGE>
interview. The expense of the preparation, printing and mailing of this Proxy
Statement and the enclosed form of Proxy and Notice of Special Meeting, and any
additional material relating to the Meeting which may be furnished to
shareholders by the Board subsequent to the furnishing of this Proxy Statement,
has been or will be borne by the Company. The Company will reimburse banks and
brokers who hold Shares in their name or custody, or in the name of nominees for
others, for their out-of-pocket expenses incurred in forwarding copies of the
proxy materials to those persons for whom they hold such Shares. To obtain the
necessary representation of shareholders at the Meeting, supplementary
solicitations may be made by mail, telephone or interview by officers of the
Company. It is anticipated that the cost of such supplementary solicitations, if
any, will not be material.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Company whether other persons are the beneficial
owners of the Shares for which proxies are being solicited from you, and, if so,
the number of copies of this Proxy Statement and other soliciting materials you
wish to receive in order to supply copies to the beneficial owners of the
Shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS,
WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING IN PERSON, ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED FOR THAT PURPOSE. BY RETURNING YOUR PROXY PROMPTLY YOU CAN
HELP THE COMPANY AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO
THAT THE MEETING CAN BE HELD. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE A
PRIOR PROXY AND VOTE THEIR PROXY IN PERSON AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors
/s/ Adrian P. Kirby
----------------------------------------
Adrian P. Kirby, Chairman, President and
Chief Executive Officer
February 9, 1996
32
<PAGE>
INDEX TO FINANCIAL STATEMENTS
LITTLE PRINCE PRODUCTIONS AND SUBSIDIARIES
Pro Forma Condensed Balance Sheet as of
September 30, 1995 (Unaudited).......................................... F-3
Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1994 and Nine Months Ended
September 30, 1995 (Unaudited)......................................... F-5
Consolidated Balance Sheet as of September 30, 1995 (Unaudited).......... F-6
Consolidated Statement of Operations for the Nine Months Ended
September 30, 1995 (Unaudited).......................................... F-7
Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 1995 (Unaudited).................................... F-8
Notes to Financial Statement ............................................ F-9
Independent Auditor's Report................................................F-10
Financial Statements:
Consolidated Balance Sheets for the Year Ended December 31, 1994.........F-11
Consolidated Statements of Operations for the Year
Ended December 31, 1994................................................F-13
Consolidated Statements of Shareholders' Deficit for the Year
Ended December 31, 1994.................................................F-14
Consolidated Statements of Cash Flows for the
Year Ended December 31, 1994...........................................F-15
Notes to Financial Statements............................................F-17
F-1
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
LPPL Corp. currently represents substantially all of the Company's
assets. The Board has requested that the shareholders grant the Board authority
to either sell or dissolve LPPL Corp. In determining the specific manner in
which to effectuate the LPPL Proposals, the Board will act in accordance with
its legally imposed fiduciary duties and select that method which provides the
greatest value to the Company and its shareholders. The Board contemplates that,
under either method, the sale or dissolution of LPPL Corp. will occur within a
date not exceeding three months from the date of the Meeting.
Set forth below is unaudited historical and pro forma financial
information for the Company as of September 30, 1995. The pro forma balance
sheet information has been prepared assuming that the sale or dissolution of
LPPL Corp. occurred on September 30, 1995. The pro forma information is based on
the historical financial information of the Company and should be read in
conjunction with the historical financial statements and notes of the Company
included in this Proxy Statement. In the opinion of management, all material
adjustments necessary to reflect the effects of the transactions have been made.
The pro forma information is unaudited and is not necessarily
indicative of the results which actually would have occurred if the transaction
had been consummated in the period presented, or on any particular date in the
future, nor does it purport to represent the financial position for future
periods.
F-2
<PAGE>
<TABLE>
LITTLE PRINCE PRODUCTIONS LIMITED
PROFORMA CONDENSED BALANCE SHEET AT SEPTEMBER 30, 1995
<CAPTION>
Condensed
Historical Proforma Proforma
Balance Sheet Adjustments Balance Sheet
------------- ----------- -------------
$ $ $
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 4,122 (4,122)(1)
Investment in US Government bond Fund 683 (683)(1)
Prepaid expenses and taxes -- --
Loan to officer of company 2,000 (2,000)
Amount owing from Riparian Securities Limited -- --
Due from former partner in Joint Venture 5,000 (5,000)(1)
Amounts due from former subsidiary -- 8,829(2) 8,829
------- ------- ------
Total current assets 11,805 (2,976) 8,829
OTHER ASSETS
Production and distribution rights 5,625 (5,625)(1) --
Investment in joint ventures 3,728 (3,728)(1) --
------- ------- ------
Total other assets 9,353 (9,353)(1) --
TOTAL ASSETS 21,158 12,329 8,829
======= ======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade creditors 150,067 (146,294)(3) 3,773
Provision for legal fees 10,000 -- 10,000
Accrued audit fees 16,000 -- 16,000
Provision for secretarial services 4,000 -- 4,000
Loan from major shareholder 78,808 78,808
------- ------- -------
TOTAL LIABILITIES 258,875 (146,294) 112,581(4)
SHAREHOLDERS' EQUITY
Common stock $.01 par value
Authorized - 25,000,000 shares
Issued and outstanding - 24,999,236 shares 249,992 -- 249,992
Additional paid-in capital 3,006,891 -- 3,006,891
Accumulated deficit (3,494,600) 133,965(1) (3,360,635)
--------- ------- ---------
Total shareholders' equity (237,717) 133,965 (103,752)
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
21,158 (12,329) 8,829
========= ======= =========
</TABLE>
F-3
<PAGE>
Adjustments to Unaudited Pro Forma Balance Sheet
(1) The pro forma adjustments have been prepared under the assumption that the
Company will receive $1 upon the sale or dissolution of LPPL Corp. The
adjustments reflect those assets and liabilities attributable to LPPL Corp. that
will no longer be included in the Company's consolidated balance sheet after
LPPL Corp.'s dissolution or sale.
(2) This adjustment reflects indebtedness due from LPPL Corp. to the Company and
assumes such amount will be repaid in full.
(3) The Company anticipates that the purchaser of LPPL Corp., if any, will
assume this liability.
(4) As discussed under "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-Future Liquidity" the Company is dependent,
in the short term, on continued loans from the Patchouli Foundation to pay its
current liabilities and, in the long term, on the acquisition of suitable
businesses that will enable the Company to become profitable.
F-4
<PAGE>
<TABLE>
LITTLE PRINCE PRODUCTIONS LIMITED
PROFORMA CONDENSED STATEMENT OF OPERATIONS
<CAPTION>
Year ended December 31, 1994 9 Months ended September 30, 1995
Condensed Condensed
Historical Proforma Historical Proforma
Statement of Proforma Statement of Statement of Proforma Statement of
Operations Adjustments Operations Operations Adjustments Operations
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Net sales 7,029 (7,029) -- 14,125 (14,125) --
Operating Costs (102,434) 58,421(1) (44,013)(2) (89,592) 29,241(1) (60,351)(2)
---------- -------- ---------- ---------- ------- ----------
Loss from continuing operations before (95,405) 51,392 (44,013) (75,467) 15,116 (60,351)
Interest income 663 (663) -- 214 (214) --
---------- -------- ---------- ---------- ------- ----------
Loss from continuing operations before (94,742) 50,729 (44,013) (75,253) 14,902 (60,351)
provision for income taxes
Provision for income taxes -- -- -- -- -- --
---------- -------- ---------- ---------- ------- ----------
NET LOSS (94,742) 50,729 (44,013) (75,253) 14,902 (60,351)
========== ======== ========== ========== ======= ==========
Loss per share (cents) (0.57) (0.26) (0.30) (0.24)
Average number of shares outstanding 16,711,564 16,711,584 24,999,236 24,999,236
========== ======== ========== ========== ======= ==========
</TABLE>
Adjustments to Unaudited Pro Forma Condensed Statement of Operations
(1) The pro forma adjustment to the "Operating Costs" represents those costs
attributable to the operations of LPPL Corp., which costs the Company is not
expected to incur after the sale or dissolution of LPPL Corp.
(2) The pro forma "Operating Costs" after adjustment constitute those operating
costs attributable to the Company and not LPPL Corp. that are expected to
continue after the sale or dissolution of LPPL Corp. These costs generally
comprise legal and auditing fees incurred by the Company.
F-5
<PAGE>
Consolidated Balance Sheets
(unaudited)
September 30, December 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,122 $ 5,241
Investment in U.S. Government Bond Fund 683 10,900
Prepaid expenses and taxes -- 612
Loan to officer of company 2,000 2,000
Amount due from Riparian Securities Limited -- 2,770
Due from former partner in Joint Venture 5,000 18,930
---------- ----------
Total current assets 11,805 40,453
PROPERTY AND EQUIPMENT - AT COST
Furniture, fixtures and equipment -- --
Less: Accumulated depreciation -- --
---------- ----------
Net property and equipment -- --
OTHER ASSETS
Production and distribution rights 5,625 7,500
Investment in joint ventures 3,728 3,728
---------- ----------
Total other assets 9,353 11,228
---------- ----------
TOTAL ASSETS $ 21,158 $ 51,681
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade creditors $ 150,067 $ 159,145
Provision for legal fees 10,000 20,000
Accrued audit fees 16,000 27,500
Provision for secretarial services 4,000 7,500
Short term loans from major shareholder 78,808 --
---------- ----------
Total current liabilities 258,875 214,145
NON-CURRENT LIABILITIES -- --
---------- ----------
TOTAL LIABILITIES 258,875 214,145
SHAREHOLDERS' EQUITY
Common stock $0.01 par value
Authorized - 25,000,000 shares
Issued and outstanding - 24,999,236 shares 249,992 249,992
Additional paid-in capital 3,006,891 3,006,891
Accumulated deficit -3,494,600 -3,419,347
---------- ----------
Total shareholders' deficit -237,717 -162,464
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 21,158 $ 51,681
========== ==========
F-6
<PAGE>
<TABLE>
Consolidated Statement of Operations
(unaudited)
<CAPTION>
Three Months ended Nine Months ended
September 30, September 30,
------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 8,525 $ 121 $ 14,125 $ 2,220
Operating costs -24,141 -20,968 -89,592 -65,345
----------- ----------- ------------ -----------
Loss from continuing operations -15,616 -20,847 -75,467 -63,125
Interest income - 179 214 576
Interest expense -- -- -- --
----------- ----------- ------------ -----------
Loss from continuing operations before
provision for income taxes -15,616 -20,668 -75,253 -62,549
Provision for income taxes -- -- -- --
Loss from continuing operations after -15,616 -20,668 -75,253 -62,549
provision for income taxes
Loss from discontinued operations -- -- -- -324,878
Gain on disposal of subsidiary -- -- -- 287,428
----------- ----------- ------------ -----------
NET LOSS -15,616 -20,668 -75,253 -99,999
=========== =========== ============ ===========
Loss per share (cents) -0.06 -0.15 -0.30 -0.71
=========== =========== ============ ===========
Average number of shares outstanding 24,999,236 13,999,236 24,999,236 13,999,236
=========== =========== ============ ===========
</TABLE>
F-7
<PAGE>
Consolidated Statement of Cash Flows
(unaudited)
Nine Months ended
September 30,
--------------------
1995 1994
OPERATING ACTIVITIES
Net loss $-75,253 $-99,999
Adjustments to reconcile net loss to Net Cash
Provided by Operating Activities:
Depreciation 1,875 2,423
Minority interests -- 12
Change in Asset and Liabilities:
Accounts Receivable and Other Debtors 17,312 97,185
Development Properties -- 406,163
Increase/(Decrease) in Liabilities:
Accounts payable and Accrued Expenses -34,078 159,706
Effect of foreign currency exchange rate
changes on cash and cash equivalents -- --
Adjustment on disposal of subsidiary -- -287,428
------- --------
Total Adjustments -14,891 378,061
------- --------
NET CASH - OPERATING ACTIVITIES -90,144 278,062
INVESTING ACTIVITIES:
Proceeds on disposal of subsidiary -- 1
Proceeds on disposal of US Government Bonds 10,217 --
------- --------
NET CASH - INVESTING ACTIVITIES 10,217 1
FINANCING ACTIVITIES
New short term loans 78,808 --
Repayment of loans -- -315,283
Bank Overdrafts -- 18,624
Cash released on disposal of subsidiary -- -2,290
------- --------
NET CASH - FINANCING ACTIVITIES 78,808 -298,949
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS -1,119 -20,886
CASH AND CASH EQUIVALENTS -
BEGINNING 5,241 29,933
------- --------
CASH AND CASH EQUIVALENTS - END 4,122 9,047
======= ========
F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Revised and Unaudited)
PART I. FINANCIAL STATEMENTS
The balance sheet as of September 30, 1995, the statements of
operations for the six months ended September 30, 1994 and 1995, and the
statement of cash flows for the six months ended September 30, 1994 and 1995
have been prepared by registrant without audit. The accompanying unaudited
interim financial statements include all adjustments (consisting only of those
of a normal recurring nature) necessary for a fair statement of the results for
the interim periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in registrant's Form 10-K for the year ended December 31, 1994.
F-9
<PAGE>
Independent Auditor's Report
The Directors and Shareholders,
Little Prince Productions, Ltd.
We have audited the consolidated balance sheets of Little Prince Productions,
Ltd., and subsidiaries at December 31, 1994 and 1993 and the related
consolidated statements of operations, shareholders' deficit and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Little Prince
Productions, Ltd., and subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of its operations and cash flows for each of three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
New York, New York
October 27, 1995 Moore Stephens LP
------------------------------------
F-10
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Consolidated Balance Sheets
31st December 31st December
1994 1993
----------- -----------
Assets $ $
Current Assets
Cash and cash equivalents 5,241 29,933
Investment in US Government Bond Fund
(note 6) 10,900 20,000
Prepaid expenses and taxes 612 27,807
Settlement proceeds receivable (note 11) -- 50,000
Development properties (note 7) -- 3,548,150
Other debtors (note 13) 23,700 74,181
----------- -----------
Total current assets 40,453 3,750,071
Property and Equipment-At Cost
Furniture, fixtures and equipment -- 2,996
Less: Accumulated depreciation -- (1,033)
----------- -----------
Net property and equipment -- 1,963
Other Assets
Production rights (note 8) 7,500 10,000
Investment in joint ventures 3,728 728
Total other assets 11,228 10,728
----------- -----------
Total Assets $ 51,681 $ 3,762,762
=========== ===========
The accompanying notes are an integral part of these financial statements
F-11
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Consolidated Balance Sheets
31st December 31st December
1994 1993
----------- -----------
Liabilities and Shareholders' Deficit $ $
Current Liabilities
Accounts payable 159,145 743,420
Mortgage loan (note 9) -- 2,516,589
Bank loan (note 9) -- 723,325
Other current liabilities (note 14) 55,000 219,547
----------- -----------
Total current liabilities 214,145 4,202,881
Minority shareholders' interests -- 85,309
----------- -----------
214,145 4,288,190
Shareholders' Deficit
Common stock $0.01 par value
Authorized-25,000,000 shares
Issued and outstanding
24,999,236 shares (1993: 13,999,236)
(note 18) 249,992 139,992
Additional paid-in capital 3,006,891 2,621,735
Accumulated deficit (3,419,347) (3,019,251)
Foreign currency translation adjustment
(note 17) -- (267,904)
----------- -----------
Total shareholders' deficit (162,464) (525,428)
----------- -----------
Total Liabilities and Shareholders' Deficit $ 51,681 $ 3,762,762
=========== ===========
The accompanying notes are an integral part of these financial statements
F-12
<PAGE>
<TABLE>
Little Prince Productions, Ltd.
and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
Year ended 31st December
--------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Net sales (note 2) $ 7,029 $ 12,726 $ 300
Operating costs (102,434) (189,594) (169,538)
(Loss)/income from continuing operations (95,405) (176,868) (169,238)
Interest income (note 3) 663 698 117
------------ ------------ ------------
(Loss)/income from continuing operations before
provision for income taxes (94,742) (176,170) (169,121)
Provision for income taxes (note 4) -- -- --
------------ ------------ ------------
Loss from continuing operations after provision for
income taxes (94,742) (176,170) (169,121)
Discontinued Operations
(Loss)/income from discontinued operations (note 5) (324,878) (2,195,149) 162,565
Gain on disposal of subsidiary (note 16) 287,428 -- --
------------ ------------ ------------
Net Loss (132,192) (2,371,319) (6,556)
============ ============ ============
Loss per share:
Continuing Operations (0.01) (0.01) (0.01)
Discontinued Operations (0.02) (0.16) 0.01
Gain on disposal of subsidiary 0.02 -- --
------------ ------------ ------------
Net loss (0.01) (0.17) --
============ ============ ============
Average number of shares outstanding 16,711,564 13,999,236 13,999,236
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-13
<PAGE>
<TABLE>
Little Prince Productions, Ltd.
and Subsidiaries
<CAPTION>
Consolidated Statements of Shareholders' Deficit
Common Stock
--------------------
Foreign
Additional Currency
Number of Paid-in Translation Accumulated
Shares Amount Capital Adjustment Deficit Total
---------- -------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance-31st December 1991 393,022 $105,680 $1,832,911 $229,856 $(641,376) $1,527,071
Issuance of ordinary shares 206,399 19,918 857,947 -- -- 877,865
Business combination (note 1)
Recapitalization adjustment
Founder shares (30,000) (48,984) 48,984 -- -- --
Ordinary shares (551,119) (47,102) 47,102 -- -- --
Deferred shares (18,302) (29,512) 29,512 -- -- --
Issuance of Common Stock in Exchange for Stock of TRP 11,899,236 118,992 (118,992) -- -- --
Acquired Equity Section of LLP (note 1) 2,100,000 21,000 (75,729) -- -- (54,729)
Translation adjustment -- -- -- (476,024) -- (476,024)
Net loss for the year -- -- -- -- (6,556) (6,556)
---------- -------- ---------- -------- ----------- ---------
Balance-31st December 1992 13,999,236 139,992 2,621,735 (246,168) (647,932) 1,867,627
Translation adjustment -- -- -- (21,736) -- 21,736)
Net loss for the year -- -- -- -- (2,371,319) (2,371,319)
---------- -------- ---------- -------- ----------- ---------
Balance-31st December 1993 13,999,236 139,992 2,621,735 (267,904) (3,019,251) (525,428)
Issuance of ordinary shares-October 3, 1994 11,000,000 110,000 385,156 -- -- 495,156
Translation adjustment -- -- -- -- -- --
Transfer through reserves on disposal of subsidiary -- -- -- 267,904 (267,904) --
Net loss for the year -- -- -- -- (132,192) (132,192)
---------- -------- ---------- -------- ----------- ---------
Balance-31st December 1994 24,999,236 $249,992 $3,006,891 $ -- $(3,419,347) $(162,464)
========== ======== ========== ======== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-14
<PAGE>
<TABLE>
Little Prince Productions, Ltd.
and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Year ended 31st December
-----------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities
Net loss $ (132,192) $(2,371,319) $ (6,556)
Adjustments to reconcile net loss to
Net Cash Provided by Operating Activities:
Depreciation and amortization 3,048 36,090 2,560
Effect of foreign currency exchange rate
changes on cash and cash equivalents -- 25,019 (65,825)
Adjustment on disposal of fixed assets -- (148) 13,855
Minority interests 12 (3,799) (9,900)
Capitalization of interest as development properties cost -- 207,678 497,593
Adjustment on disposal of subsidiary (see note 16) (287,428) -- --
Change in Assets and Liabilities:
(Increase)/Decrease in Assets:
Accounts Receivable and other debtors 94,413 1,951,428 (1,529,579)
Development properties 406,163 2,522,337 784,809
Increase/(Decrease) in Liabilities:
Accounts payable and other current liabilities 151,640 (1,026,516) 428,450
United Kingdom Corporation Tax refunded -- 13,579 --
Net Cash Provided-Operating Activities 235,656 1,354,349 115,407
----------- ----------- -----------
Investing Activities:
Proceeds on disposal of assets -- 148 --
Capital expenditure -- (703) (2,345)
Purchase of US Government Bonds -- (20,000) --
Proceeds on disposal of subsidiary 1 -- --
Proceeds on disposal of US Government Bonds 9,100 -- --
Investment in joint venture (3,000) -- --
Business Combinations-Cash Acquired -- -- 58,403
Cash released on disposal of subsidiary (2,290) -- --
----------- ----------- -----------
Net Cash Provided/(Used)-Investing Activities 3,811 (20,555) 56,058
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-15
<PAGE>
<TABLE>
Little Prince Productions, Ltd.
and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
<CAPTION>
Year ended 31st December
-----------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Financing Activities $ $ $
Issuance of common stock 32,500 -- --
New short term loans -- -- 1,103,447
Repayment of loans (315,283) (1,360,235) (1,472,088)
Bank overdrafts 18,624 -- (1,578)
----------- ----------- -----------
Net Cash Used-Financing Activities (264,159) (1,360,235) (370,219)
----------- ----------- -----------
Net Decrease in Cash and Cash Equivalents (24,692) (26,441) (198,754)
Cash and Cash Equivalents-Beginning of Years 29,933 56,374 255,128
----------- ----------- -----------
Cash and Cash Equivalents-End of Years 5,241 29,933 56,374
=========== =========== ===========
Supplemental Disclosure
During 1994, 7,750,000 common shares of $0.01 each were issued in respect of cancellation of
liabilities amounting to $462,657 (see note 18)
1994 1993 1992
----------- ----------- -----------
Cash paid during the year for: $ 34 $ 876 $ 1,352
=========== =========== ===========
Interest (net of amount capitalized)
Income taxes paid -- -- --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-16
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
1. Summary of Significant Accounting Policies
Business Combination. The accompanying consolidated financial statements give
effect to the business combination of Little Prince Productions, Ltd. and Tyne
River Properties plc as a reverse acquisition on 16th November 1992 under the
purchase method of accounting. Tyne River Properties plc was as at 31st December
1993, a subsidiary of Little Prince Productions, Ltd. On 29th March 1994, Tyne
River Properties plc and all other United Kingdom subsidiaries were sold for
(pound)1 (see note 5). The financial results in respect of each of the two years
ended 31st December 1993 have been restated so as to show the financial results
of Tyne River Properties Plc as a discontinued operation. The financial results
included in respect of Tyne River Properties plc are for the years ended 31st
December 1992 and 1993, and for the period up to 29th March 1994.
On 16th November 1992 Little Prince Productions, Ltd. acquired 100% of the
issued share capital of Tyne River Properties plc, a company incorporated in the
United Kingdom, in exchange for 11,899,236 shares of Little Prince Productions,
Ltd. common stock, composing upon their issuance, approximately 85% of the
common stock of the Company, issued and outstanding. Due to the relative size of
the companies, Tyne River Properties plc was deemed the purchaser. For
accounting purposes, the acquisition was treated as a recapitalization of Tyne
River Properties plc with Tyne River Properties plc the acquirer (reverse
acquisition). The statement of operations for the year ended 31st December 1992
reflects the operations of the Company and LPPL Corp. from 16th November 1992
onwards.
As at 31st December 1993 Tyne River Properties plc owned all of the issued and
outstanding capital stock of the following companies, all of which are
incorporated in England, and whose principal activity was property development,
unless otherwise indicated:
Exchange Buildings Limited
Pandon Developments Limited
Selective Construction Projects plc (88.8% interest)
Period and Country Estates Limited (Dormant)
Little Prince Productions, Ltd. also owned all of the issued and outstanding
common stock of LPPL Corp. Formerly inactive until 17th November 1992, this
company is now involved in the presentation of theatrical performances.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Intercompany transactions and
balances have been eliminated on consolidation.
Basis of accounting, fiscal year
The financial statements are presented on the accruals basis of accounting and
the fiscal year ends on 31st December of each year.
Net sales
Net sales comprised royalty income.
Depreciation
The accompanying notes are an integral part of these financial statements
F-17
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
Fixtures and fittings are depreciated over four years on the straight
line basis.
Development properties
Development properties are included in the balance sheet date at the
lower of cost (including attributable interest and overheads) and net
realizable value.
Production rights
Production rights are amortized by systematic charges to income over
the estimated remaining life of such rights pursuant to APB17 and the
provisions of FAS63. Usually capitalized rights are amortized based on
the estimated number of future showings, however, the rights provide
for unlimited showings over the period of the agreement and in
management's opinion, the estimated number of future showings are not
determinable. Where applicable, an additional charge is made in order
to write down the value of the rights to their perceived value.
Foreign currency translation
Balance sheet amounts denominated in United Kingdom sterling have been
translated into U.S. dollars using the year end rate of exchange.
Operations results denominated in United Kingdom sterling have been
translated into U.S. Dollars using the average annual rate of exchange.
Cash and cash equivalents
For the purposes of the statement of cash flows, the Company considers
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Net loss per share
Net loss per share is computed by dividing the net loss by the average
number of common shares outstanding during the period.
2. Net Sales
Net sales comprised: 1994 1993
------ -------
Royalty income $7,029 $12,726
===== ======
Virtually all royalty income is derived from one payor. The income
arises from the Company's interest in various theatrical productions.
The accompanying notes are an integral part of these financial statements
F-18
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
3. Interest Income
1994 1993
------ ------
Bank interest $663 $698
4. Provision for Income Taxes
No liability to income taxes arises due to the losses of the Company
and its subsidiary.
As of January 1,1993 the Company adopted Statement of Accounting
Standards No. 109 ("FAS 109"), Accounting for Income Taxes. In prior
years the Company followed the provisions of Accounting Principles
Board Opinion 11. Prior year financial statements have not be restated
to reflect the provisions of FAS 109.
No cumulative effect of the change in accounting principle to FAS 109
is recorded in the statement of operations as the gross deferred asset
of $1,160,000 has been offset by a valuation allowance of the same
amount. The gross asset arises from net operating loss carryovers;
however, management believes that there will not be enough taxable
income in the future to utilize the losses and therefore a valuation
allowance has been established for the full amount of the asset.
The Company has approximately $2,910,400 of net operating losses which
can be used to offset future federal taxable income. The losses expire
as follows:
1996 $671,000
1997 50,000
1998 14,200
1999 12,600
2003 236,400
Thereafter 1,926,200
----------
$2,910,400
==========
5. (Loss) Income from Discontinued Operations
(Loss) income from discontinued operations relates to the financial
results of Tyne River Properties Plc., which company was sold on 29th
March 1994. The results comprised:
The accompanying notes are an integral part of these financial statements
F-19
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
5. (Loss) / Income from Discontinued Operations-Continued
1994 1993 1992
-------- ---------- ----------
$ $ $
Net sales:
Sale of properties 524,175 3,062,958 1,684,280
Rental income 122 28,307 35,466
-------- ---------- ----------
524,297 3,091,265 1,719,746
Operating costs:
Provision of foreseeable losses
on development contacts -- (509,190) (1,088,971)
Write back of prior year
provision against land and
buildings held for -- -- 156,651
development
Write down of land and
buildings held for
development to net realizable -- (152,494) (155,710)
value
Insurance proceeds on
destination of property -- -- 1,398,186
Other operating costs (849,365) (4,744,123) (1,799,013)
(849,365) (5,405,807) (1,488,857)
(Loss)/Income from operations (325,068) (2,314,542) 230,889
Interest income 212 3,370 7,307
Interest expense (34) (876) (1,352)
-------- ---------- ----------
(Loss)/Income before
provision for income taxes (324,890) (2,312,048) 236,844
Provision for income taxes -- 113,056 (85,346)
-------- ---------- ----------
(Loss)/income after provisions
for income taxes (324,890) (2,198,992) 151,498
Minority interests 12 3,843 11,067
-------- ---------- ----------
Net (loss)/income (324,878) (2,195,149) 162,565
======== ========== ==========
The accompanying notes are an integral part of these financial statements
F-20
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
During the year ended 31st December 1992, a property which formed part of a
development project being undertaken by a subsidiary was destroyed by fire. The
property has since been demolished upon the recommendation of the group's
insurers. The insurance proceeds, which were received in 1993, were $1,859,949
((pound)91,228,500 at 1992 year end rates); deducting costs attributable to that
development project gives rise to an exceptional profit of $1,398,186.
Interest Costs
1994 1993
------- --------
On bank loans and overdrafts $74,042 $404,459
On other loans 34 876
------- --------
74,076 405,335
Transfer to development properties (note 7) (74,042) (404,459)
------- --------
Interest expense 34 876
======= ========
Provision for Income Taxes
1994 1993
------- --------
United Kingdom corporation tax on profits for
the year at 33% $ -- $ --
United Kingdom corporation tax recoverable -- (113,056)
------- --------
$ -- $113,056
======= ========
6. Investment in US Government Bond Fund
The investment in US Government Bond Fund relates to an investment in a
mutual fund comprised of short term debt securities issued by the US
Treasury and other US Government agencies. As a mutual fund, investment
has no stated maturity date.
On 1 January 1994, the Company adopted Statement of Accounting
Standards No. 115 ("FAS 115"), Accounting for Certain Investments in
Debt and Equity Securities; the cumulative effect of the change in
accounting principle was immaterial. The investment is classified as
available for sale securities. At 31st December 1994 cost approximates
market. During 1994 there were no material gross unrealized gains.
The accompanying notes are an integral part of these financial statements
F-21
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
7. Development Properties
1994 1993
Development properties $ -- $3,229,950
Land held for development -- 318,200
--------- ----------
-- 3,548,150
========= ==========
Cumulative interest included in development -- 894,941
properties ========= ==========
On 29th March 1994 Tyne River Properties plc and all other United
Kingdom subsidiaries were sold.
8. Production Rights
On 4th April 1980, the President of the Company assigned to the Company
all of the Rights relating to theatrical productions which he had
received, in connection with an agreement with TLP Productions, Ltd.,
Editions Gallimard and Solifilm S.A. Such Rights and the related value
of the shares then issued were recorded in the Company's books at
$80,000 plus additional costs of $6,500 for an extension of the Rights
and legal fees totalling $86,500. These Rights were subsequently
transferred to LPPL Corp. As at 31st December 1994, the unamortized
portion of the Rights was $7,500 (1993: $10,000 after a write down of
$28,925 in 1993).
9. Mortgage and Bank Loans
The mortgage loan was a revolving facility and was secured on a
development property. No repayment date was set for this facility.
Interest was charged at the prevailing United Kingdom base mortgage
rate as charged to owner occupiers plus 2 per cent.
The bank loan was secured on a development property. No fixed maturity
date existed, but the loan was repayable on demand. Interest was
charged at the prevailing United Kingdom bank base rate plus 2 1/2 per
cent.
1994 1993 1992
--------- --------- ---------
Mortgage Loan
Maximum amount outstanding ((pound)) 1,700,398 2,806,857 3,057,947
Weighted average interest rate (%) 10.3 10.6 13.3
Weighted average loan balance ((pound)) 1,566,310 1,768,265 2,457,965
Weighted average interest by value (%) 10.3 10.6 13.4
Bank Loan
Maximum amount outstanding ((pound)) 488,733 488,733 488,733
Weighted average loan balance ((pound)) 488,733 488,733 488,733
The accompanying notes are an integral part of these financial statements
F-22
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
Due to the nature of the bank loan whereby interest is charged direct
to the bank account, no details of the weighted average interest rate
and weighted average interest rate by value have been calculated.
On 29th March 1994, Tyne River Properties plc was sold and consequently
the mortgage no longer remain within the group.
10. Related Parties
1994 1993
--------- ---------
Transactions with related parties comprised:
Emoluments $ 43,229 $ 56,250
Consideration to third parties for making
available the services of directors 171,355 264,375
Other payments -- 35,766
--------- ---------
$214,584 $356,391
========= =========
Transactions with related parties relate to the following:
1994 1993
---------- -----------
Mr. A.P. Kirby $ -- $ --
Mr. C.N.C. Jones -- --
Mr. T. Galgey 61,979 95,625
Mr. W.J. Peacock 54,688 120,141
Mr. P.N. Chapman 54,688 84,375
Mr. J. Tandet 25,000 28,125
Mr. C. Kuehner 18,229 28,125
---------- -----------
$214,584 $356,391
========== ===========
Mr. W.J. Peacock was a director of the Company, until his resignation
in August 1994. Oform Associates Limited, a company incorporated in
England, of which Mr. W.J. Peacock is a minority shareholder and
non-executive director, provided project management, engineering,
design and costing services in respect of the development projects
carried out by Pandon Developments Limited (a subsidiary of the
Company) and was entitled to receive 5.5 per cent of the construction
costs of the project (capped at (pound)6,000,000; $8,880,000 at 1993
year end exchange rates). During the year ended 31st December 1993,
$35,766 was paid in respect of these services. From this sum,
disbursements were made to the Consulting Engineers and Quantity
Surveyors employed by Oform Associates Limited for the provision of
their services as follows: the Consulting Engineers were entitled to
receive 0.67 per cent of the construction costs of the project and
Quantity Surveyors were entitled to receive 1.0035 per cent of the
construction costs (capped at (pound)6,000,000; $8,880,000 at 1993 year
end exchange rates) from the fee paid to Oform Associates Limited.
The accompanying notes are an integral part of these financial statements
F-23
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
Fees payable in respect of consultancy services provided by Mr. W.J.
Peacock in the year amounted to $54,688 (1993 $84,375). All outstanding
liabilities due to Mr. W.J. Peacock were sold as part of the settlement
agreement (see note 18).
Mr. T. Galgey was a director of the Company until his resignation in
August 1994. Galgey Financial Services Limited of which Mr. T. Galgey
is a director and shareholder, provided consultancy services to the
Group. Fees payable in respect of such services in the year amounted to
$61,979 (1993: $95,625). All outstanding liabilities due to Mr. T.
Galgey were settled as part of the settlement agreement (see note 18).
Mr. P.N. Chapman is a director of the Company. Chapman & Chapman, a
firm of Chartered Accountants in which Mr. P.N. Chapman is a partner,
provided consultancy and accounting services to the Group. Fees payable
in respect of such services in the year amounted to $54,688 (1993:
$84,375). All outstanding liabilities due to Mr. P.N. Chapman were
settled as part of the settlement agreement (see note 18).
LPPL Corp. maintains its office at 555 Fifth Avenue, New York, N.Y.,
the office of Mr. J. Tandet, who was the President of the Company until
his resignation in August 1994. Mr. Tandet receives no remuneration for
this facility from the Company or from LPPL Corp. Fees payable in
respect of his services as a director in the year and for managing the
affairs of the Company's operating subsidiary, LPPL Corp, amounted to
$25,000 (1993: $28,125). All outstanding liabilities due to Mr. J.
Tandet were settled as part of the settlement agreement (see note 18).
Mr. C. Kuehner was a director of the Company until his resignation in
August 1994. Fees payable in respect of such services in the year
amounted to $18,229 (1993: $28,125). All outstanding liabilities due to
Mr. C. Kuehner were settled as part of the settlement agreement (see
note 18).
11. Litigation Settlement Agreements
On 18th December 1990, an action against Little Prince Productions,
Ltd. commenced before the Tribunal de Grande Instance of Paris, France.
The Plaintiff was seeking a judicial declaration of the termination of
an agreement, along with reimbursement of all sums received and damages
and legal fees of approximately $200,000. In February 1992, an
agreement was reached to settle the above matter whereby Little Prince
Productions, Ltd. was to receive $200,000 in return for giving up
certain foreign rights to the "Rights" as follows: $50,000 receivable
upon full performance of the Settlement Agreement and four receipts of
$25,000 each every three months thereafter with a final receipt of
$50,000 by November 1993. At the date of the signing of these financial
statements, all monies had been received.
The Settlement also stipulated that the Company must abandon the
corporate name "Little Prince Productions, Ltd." within 18 months from
6th February 1992. As at the date of the signing of these financial
statements, the name of the Company has not been changed nor has any
action been commenced by the plaintiff. The Company's former Counsel
for a rescinded business combination instituted a lawsuit for legal
fees of $81,000 in connection therewith. The Company filed a
counterclaim against the plaintiff. In December 1992. All parties
entered into a settlement agreement and in March 1993, the Group paid
$25,000 in full settlement of this matter.
The accompanying notes are an integral part of these financial statements
F-24
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
In connection with the Group's 41% investment in the production of the
musical play "Hearts Desire," the Cleveland Playhouse brought an action
in the United States District Court for the Northern District of Ohio
for the total sum of $75,000. The litigation was settled for $73,000 in
April 1993, with $29,930 applicable to the Group. This amount was
settled in the year ended 31st December 1993.
12. Royalty Agreements
On 31st December 1992, the LPPL Corp. authorized Theatreworks USA Corp,
a New York stage production company which produces plays for family
audiences to produce a new musical stage production based upon the
literary work entitled `The Little Prince' (the "Work") and geared
specifically for a juvenile audience. LPPL Corp. was paid $5,000 in
January 1993 as an advance against two per cent (2%) of all gross
revenues derived by Theatreworks from the production. No production has
yet been mounted.
On 1st December 1992 LPPL Corp. authorized two independent theatrical
producers to produce another new musical stage production based upon
the Work, in New York by 31st December 1993, geared for an adult
audience. LPPL Corp. received a $2,000 advance in May 1993 of against
royalties of 1 1/2 per cent of gross weekly box office receipts
increasing to 2% upon recoupment of production costs derived from the
production. A production was mounted for one week in October 1993. The
show was subsequently closed in order to move to a more suitable
location and was reopened on 13th November 1993.
Pursuant to the terms of their respective agreements with LPPL Corp,
the two productions will not be staged at the same time or in the same
location.
13. Other Debtors
At 31st December 1994 the following components of Other Debtors
comprised at least 5% of total current assets:
Due from Riparian Securities Limited $ 2,770
Due from former joint venture partner 18,930
--------
$ 21,700
========
14. Other Current Liabilities
At 31st December 1994 the total of Other Current Liabilities is
comprised of accrued professional fees. At 31st December 1993 no single
component comprised at least 5% of the balance in this account.
15. Post Balance Sheet Event
a. In February 1995, the Company entered into an agreement with
Atlantic Properties Limited ("Atlantic"), a company
incorporated in the State of Delaware, involved in property
development. The terms of this agreement included the Company
receiving 2-1/2% of the issued share capital of Atlantic, in
return for services provided by directors of the Company to
Atlantic.
The accompanying notes are an integral part of these financial statements
F-25
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
b. On 27th July 1995, an action of the Board of Directors by
unanimous written consent resolved to authorize, empower and
direct a filing of a Proxy Statement with the Securities and
Exchange Commission and such other places as may be required.
16. Additional Information on Cash Flows
1994 1993 1992
------------- --------- ---------
Disposal of subsidiary
Cash and cash equivalents $ (2,290) $ -- $ --
Development properties (3,141,987) -- --
Accounts receivable and other debtors (33,263) -- --
Property and equipment (1,415) -- --
Accounts payable and accrued income 437,804 -- --
Loans 2,924,631 -- --
Bank overdraft 18,626 -- --
Minority shareholders' interest 85,321 -- --
------------- --------- ---------
287,427 -- --
Proceeds of disposal 1 -- --
------------- --------- ---------
Gain on disposal $287,428 $ -- $ --
============= ========= =========
17. Currency Translation Adjustment
Changes in the currency translation adjustment included in the
Shareholders' deficit section of the Consolidated Balance Sheet are as
follows:
1994 1993 1992
--------- --------- ---------
Currency translation adjustment 1st January $(267,904) $(246,168) $ 229,856
Translation adjustments -- (21,736) (476,024)
Adjustment through reserves 267,904 -- --
--------- --------- ---------
Currency translation adjustment 31st December -- (267,904) (246,168)
========= ========= =========
18. Major Shareholdings
On 22nd August 1994, the Company entered into certain agreements (the
"Agreements") with Riparian Securities Limited ("Riparian"), a firm of
professional advisers and the then directors of the Company. Pursuant
to these agreements, a total of 11 million shares of the Company's
common stock were issued for $495,146. Of the 11 million shares, a
total of 7,750,000 were issued to the following individuals and
entities in settlement of liabilities totalling $462,656:
The accompanying notes are an integral part of these financial statements
F-26
<PAGE>
Little Prince Productions, Ltd.
and Subsidiaries
Notes to the Financial Statements
31st December 1994
18. Major Shareholdings - Continued
Amount of Number of
Name Liability Shares issues
------------------ --------- -------------
Terence G. Galgey $ 83,352 1,250,000
William J. Peacock 98,103 1,575,000
Peter N. Chapman 100,648 1,625,000
Carl Kuehner 46,354 800,000
John Milling 134,199 2,500,000
The remaining 3,250,000 shares were issued to Riparian for $32,500. Subsequent
to 22nd August 1994, Riparian acquired an additional 3,000,000 shares of common
stock, resulting in Riparian owning 25% of the issued and outstanding common
stock of the Company. On 17th January 1995 Riparian transferred its entire
holding to the Patchouli Foundation, a Liechtenstein Stiftung. As of 7th March
1995 the Patchouli Foundation owned 25% of the issued and outstanding common
stock of the Company.
The Agreements also required, among other things, that Messrs. Galgey, Peacock,
Kuehner and Tandet resign as directors of the Company, and that Messrs. Kirby
and Jones be appointed as directors.
The Company also entered into an agreement on 22nd August 1994 to issue 500,000
shares to Mr. J. Tandet, at such time as the Company's certificate of
incorporation is amended so as to increase its authorized capital stock, in
consideration of Mr. Tandet's agreement to render extensive legal services in
connection with certain litigation matters of the group. At the date of the
signing of these financial statements, these shares have not been issued.
The accompanying notes are an integral part of these financial statements
F-27
<PAGE>
APPENDIX A
FORM OF AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement") dated as of
______________, 1996, by and between Little Prince Productions, Ltd., a New York
corporation ("Little Prince"), and Atlantic Industries, Inc., a Colorado
corporation and a wholly owned subsidiary of Little Prince ("Atlantic").
W I T N E S S E T H:
WHEREAS, Little Prince has an authorized capitalization of (a)
25,000,000 shares of common stock, par value $.01 per share ("LP Common"), of
which 24,999,236 shares are issued and outstanding on the date hereof and (b) no
shares of Preferred Stock;
WHEREAS, Atlantic has an authorized capitalization of (a) 40,000,000
shares of Common Stock, par value $.01 per share ("Atlantic Common"), of which
100 shares are issued and outstanding as of the date hereof and all of such
shares are held by Little Prince, and (b) 10,000,000 shares of Preferred Stock,
none of which are issued and outstanding;
WHEREAS, the respective Boards of Directors of Little Prince and
Atlantic deem it advisable and in the best interest of each such corporation and
its stockholders that Little Prince reincorporate in Colorado by means of a
merger of such corporations as herein contemplated, and, in accordance
therewith, that Little Prince be merged into Atlantic in the manner contemplated
herein (the "Merger"), with Atlantic surviving and that the LP Common be
exchanged for Atlantic Common, on the basis of one share of Atlantic Common for
every 10 shares of LP Common, with the result that the holders of LP Common will
become the holders of Atlantic Common upon consummation of the transactions
provided for herein, and that such Merger be submitted to and approved and
adopted by the holders of LP Common and by Little Prince as sole stockholder of
Atlantic;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and subject to the conditions herein
set forth and for the purpose of stating the terms and conditions of the Merger,
the mode of effecting the same, the manner of converting the shares of LP Common
issued and outstanding immediately prior to the filing of the Articles of Merger
with the Secretary of the State of the State of Colorado and with the Department
of State of the State of New York (the date and time of the last to occur of
such filings being herein called the "Effective Date"), into shares of Atlantic
Common, the manner of exchanging the shares of LP Common issued and outstanding
immediately prior to the Effective Date for shares of Atlantic Common, and such
other details and provisions as are deemed desirable, the parties hereto have
agreed, subject to the terms and conditions hereinafter set forth and in
accordance with the terms and provisions of the Colorado Business Corporation
Act (the "Colorado Law") and the New York Business Corporation Law (the "New
York Law"), as follows:
ARTICLE I
MERGER OF LITTLE PRINCE AND ATLANTIC
Section 1.01. On the Effective Date hereof, pursuant to the provisions
of the Colorado Law and the New York Law, Little Prince and Atlantic shall be
merged into a single corporation by Little Prince merging into Atlantic, with
Atlantic surviving as the surviving corporation (hereinafter sometimes referred
to as the "Surviving Corporation"). Upon consummation of the Merger, the
separate corporate existence of Little Prince shall cease and the Surviving
Corporation shall become the owner, without transfer, of all rights, powers,
assets, qualifications and property of Little Prince, and the Surviving
Corporation shall become subject to all debts and liabilities of Little Prince
in the same manner as if the Surviving Corporation had itself incurred them.
Appendix A-1
<PAGE>
Section 1.02. Name of Surviving Corporation. The name of the Surviving
Corporation shall be "Atlantic Industries, Inc." The purposes, county where the
principal office for the transaction of business shall be located, number and
classification of directors, and capital stock of the Surviving Corporation
shall be as appears in the Articles of Incorporation of Atlantic and as
hereinafter set forth.
Section 1.03. Charter and Bylaws of Atlantic. From and after the
Effective Date and until thereafter duly amended as provided by law, the
Articles in Incorporation of Atlantic and the Bylaws of Atlantic, in each case
as in effect at the Effective Date, shall become the Articles of Incorporation
and Bylaws of the Surviving Corporation.
Section 1.04. Directors and Officers of Atlantic.
(a) The number of directors in each class of directors of
Atlantic immediately prior to the Effective Date shall be the number of
directors in each class of directors of the Surviving Corporation, and
the directors of Atlantic immediately prior to the Effective Date shall
be the directors of the Surviving Corporation, to hold office in the
same classes as in effect immediately prior to the Effective Date, in
accordance with the Bylaws of the Surviving Corporation, until their
respective successors are duly appointed or elected and qualified, or
their prior death, resignation or removal.
(b) The officers of Little Prince immediately prior to the
Effective Date shall be the officers of the Surviving Corporation until
their respective successors are duly elected and qualified, or their
prior resignation, removal or death.
ARTICLE II
EXCHANGE AND ISSUANCE OF STOCK
Section 2.01. The manner of effecting the Merger contemplated herein,
including the conversion of the shares of LP Common issued and outstanding
immediately prior to the Effective Date into shares of Atlantic Common shall be
as follows:
(a) At the Effective Date each of the following transactions
shall be deemed to occur simultaneously:
(i) Every 10 shares of LP Common issued and
outstanding immediately prior to the Effective Date shall, by
virtue of the Merger and without any action on the part of the
holder thereof, automatically be cancelled and converted into
and shall be one fully paid and non-assessable share of
Atlantic Common.
(ii) All shares of LP Common which shall then be
held in Little Prince's treasury, if any, shall cease to
exist, and all certificates representing such shares shall be
cancelled by virtue of the Merger.
(iii) Each share of Atlantic Common presently issued
in the name of Little Prince shall be cancelled and retired
and shall resume the status of authorized and unissued shares
of Atlantic Common and no shares of Atlantic Common or other
securities of Atlantic shall be issued in respect thereof.
(b) After the Effective Date:
(i) Each holder of a certificate or certificates
representing issued and outstanding shares of LP Common (a
"Former Holder"), may, but is not required to, surrender the
same to American Stock Transfer & Trust Company, or such other
agent or agents as may be appointed
Appendix A-2
<PAGE>
by Atlantic (the "Exchange Agent") for cancellation or
transfer, and each such holder or transferee will be entitled
to receive a certificate or certificates representing one
shares of Atlantic Common for every 10 shares of LP Common
previously represented by the stock certificates surrendered
until so surrendered or presented for transfer, each
certificate which, prior to the Effective Date, represented
issued and outstanding shares of LP Common, shall be deemed
and treated for all corporate purposes to represent the
ownership of one-tenth (1/10) of a share of Atlantic Common
for each share of LP Common represented by the certificate as
though such surrender or transfer and exchange had taken
place. The stock transfer books for LP Common Stock shall be
deemed to be closed at the Effective Date with respect to each
such share of LP Common, and no transfer of such shares shall
thereafter be made on such books.
(ii) If any certificate for Atlantic Common is to be
issued in a name other than that in which the certificate for
LP Common surrendered for exchange is registered, shall be a
condition of such exchange that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange shall
pay to the Exchange Agent any transfer or other taxes required
by reason of the issuance of such Atlantic Common in any name
other than that of the registered holder of the certificate
surrendered, or established to the satisfaction of the
Exchange Agent that such tax has been paid or is not
applicable.
Section 2.02. Dissenting Stockholders. Notwithstanding the provisions
of Section 2.01, any outstanding shares of LP Common held by stockholders who
shall have elected to dissent from the Merger and who shall have exercised and
perfected appraisal rights with respect to such shares in accordance with
Section 623 of the New York Law ("Dissenting Stockholders") shall not be
converted into shares of Atlantic Common but shall be entitled to receive only
such consideration as shall be provided in said Section 623, except that LP
Common outstanding on the Effective Date and held by a Dissenting Stockholder
who shall thereafter withdraw his election to dissent from the Merger or lose
his right to dissent from the Merger as provided in said Section 623, shall be
deemed converted, as the Effective Date, into such number of shares of Atlantic
Common as such holder otherwise would have been entitled to receive as a result
of the Merger.
ARTICLE III
STOCKHOLDER APPROVAL
Section 3.01. Approval by Stockholders of Little Prince. Little Prince
shall duly convene the Special Meeting of Stockholders of Little Prince (the
"Special Meeting") in connection with which, among other things, the approval by
such stockholders of this Merger Agreement, and the transactions contemplated
hereby, shall be solicited. Little Prince shall use its reasonable best efforts
to obtain such approval.
Section 3.02. Approval by Stockholders of Atlantic. Little Prince, as
sole stockholder of Atlantic, shall consent in writing to the execution of this
Merger Agreement prior to the Effective Date.
ARTICLE IV
CLOSING CONDITIONS; CLOSING
Section 4.01. Closing Conditions. The consummation of the Merger and
the transactions set forth in this Merger Agreement are subject to the
satisfaction on or prior to the Effective Date of the following conditions:
Appendix A-3
<PAGE>
(a) The transactions contemplated by this Merger Agreement
shall have received the approval by affirmative vote of the holders of
two-thirds of the shares of LP Common outstanding at the record date of
the Special Meeting.
(b) The absence of any material pending or threatened
litigation concerning the Merger or any other transaction contemplated
by the Merger Agreement (unless such condition shall be waived by the
Board of Directors of Little Prince);
(c) Statutory dissent and appraisal rights not having been
exercised by the holders or more than 5% of the outstanding LP Common
Stock (unless such condition shall be waived by the Board of Directors
of Little Prince).
Section 4.02. Closing. The closing under this Merger Agreement shall
occur on the Effective Date at a place mutually convenient to all the parties
hereto.
ARTICLE V
TERMINATION OR ABANDONMENT OF MERGER
This Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Date by the Board of Directors of Little Prince, if
the Board of Directors of Little Prince shall determine for any reason that the
consummation of the transaction contemplated hereby would be inadvisable or not
in the best interests of Little Prince and its stockholders.
ARTICLE VI
AMENDMENTS
At any time prior to the Effective Date, the parties hereto may by
written agreement amend, modify or supplement any provision of this Merger
Agreement, provided that no such amendment, modification or supplement may be
made if, in the sole judgment of the Board of Directors of Little Prince, it
will materially and adversely affect the rights and interests of Little Prince's
stockholders.
ARTICLE VII
GOVERNING LAW
This Merger Agreement has been delivered in, and shall be construed
under and in accordance with the laws of the State of New York except to the
extent the laws of Colorado shall apply to the Merger.
ARTICLE VIII
HEADINGS
The headings set forth herein are for convenience only and shall not be
used in interpreting the text of the section in which they appear.
Appendix A-4
<PAGE>
ARTICLE IX
SUCCESSORS AND ASSIGNS
This Merger Agreement may not be assigned by either party without the
consent of the other party hereto, and this Merger Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
parties hereto.
ARTICLE X
COUNTERPARTS
For the convenience of the parties hereto, this Merger Agreement may be
executed in separate counterparts, each of which, when so executed, shall be
deemed to be an original, and such counterparts when taken together shall
constitute but one and the same instrument.
ARTICLE XI
EXTENSIONS OF TIME; WAIVERS
Any time prior to the Effective Date the parties hereto may, by written
agreement (a) extend time for the performance of any of the obligations or other
acts of the parties hereto, (b) waive any breach or inaccuracy in the
representations and warranties contained in this Merger Agreement or in any
document delivered pursuant hereto, or (c) waive compliance with any of the
covenants, conditions or agreements contained in this Merger Agreement, except
as set forth in Section 4.01 hereof.
IN WITNESS WHEREOF, Little Prince and Atlantic, pursuant to the
approval and authority duly given by resolutions adopted by their respective
Boards of Directors, each have caused this Merger Agreement to be executed by a
duly authorized officer thereof, each of whom affirms the statements made herein
by his respective company under penalty of perjury, and has further caused its
respective corporate seal to be hereunto affixed, as of the date first above
written.
Little Prince Productions, Ltd., a New York corporation
By __________________________________________________
Name:Adrian P. Kirby
------------------------------------------------
Title:Chairman, President and Chief Executive Officer
-----------------------------------------------
Atlantic Industries, Inc., a Colorado corporation
By __________________________________________________
Name:Adrian P. Kirby
------------------------------------------------
Title:Chairman, President and Chief Executive Officer
-----------------------------------------------
Appendix A-5
<PAGE>
APPENDIX B
----------
ARTICLES OF INCORPORATION
OF
ATLANTIC INDUSTRIES, INC.
The undersigned incorporator, being a natural person of the age of
eighteen years or more, hereby establishes a corporation pursuant to the
statutes of the State of Colorado and adopts the following Articles of
Incorporation.
ARTICLE I
NAME
The name of the Corporation is Atlantic Industries, Inc.
ARTICLE II
PERIOD OF DURATION
The Corporation shall have perpetual existence.
ARTICLE III
PURPOSES
The purposes for which the Corporation is organized and its powers are
as follows:
(a) To engage in the transaction of all lawful business or
pursue any other lawful purpose or purposes for which a corporation may
be incorporated under Colorado law.
(b) To have, enjoy, and exercise all of the rights, powers,
and privileges conferred upon corporations incorporated pursuant to
Colorado law, whether now or hereafter in effect, and whether or not
herein specifically mentioned.
(c) The foregoing enumeration of purposes and powers shall not
limit or restrict in any manner the transaction of other business, the
pursuit of other purposes, or the exercise of other and further rights
and powers that may now or hereafter be permitted or provided by law.
ARTICLE IV
CAPITAL STOCK
1. Authorized Stock. The total number of shares that the Corporation
shall have authority to issue is fifty million (50,000,000) shares, of which
40,000,000 may be issued as common stock and 10,000,000 as preferred stock, each
with a par value of $.01 per share.
2. The board of directors of the Corporation is authorized, subject to
limitations prescribed by law, to provide by resolution or resolutions for the
issuance of the shares of common or preferred stock as a class or in series,
and, by filing a certificate of designations, pursuant to the Colorado Business
Corporation Act, setting forth a copy of such resolution or resolutions, to
establish from time to time the number of shares to be included in each
Appendix B-1
<PAGE>
such series, and to fix the designation, powers, preferences, and rights of the
shares of the class or of each such series and the qualifications, limitations,
and restrictions thereof. The authority of the board of directors with respect
to the class or each series shall include, but not be limited to, determination
of the following:
The number of shares constituting any series and the
distinctive designation of that series;
The dividend rate on the shares of the class or of any series,
whether dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of
dividends on shares of the class or of that series;
Whether the class or any series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the terms of
such voting rights;
Whether the class or any series shall have conversion
privileges, and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in such
events as the board of directors shall determine;
Whether or not the shares of the class or of any series shall
be redeemable, and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be redeemable
and the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption dates;
Whether the class or any series shall have a sinking fund for
the redemption or purchase of shares of the class or of that series,
and, if so, the terms and amount of such sinking fund;
The rights of the shares of the class or of any series in the
event of voluntary or involuntary dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of
shares of the class or of that series;
Any other powers, preferences, rights, qualifications, limitations, and
restrictions of the class or of any series.
3. Voting. Each shareholder of record shall have one vote for
each share of common stock outstanding in his name on the books of the
Corporation and entitled to vote. Cumulative voting shall not be allowed in the
election of directors of the Corporation.
4. Quorum. At all meetings of shareholders, one-third of the
shares entitled to vote at such meeting by a voting group, represented in person
or by proxy, shall constitute a quorum.
5. No Preemptive Rights. No shareholder of the Corporation shall have
any preemptive or other right to subscribe for any additional shares of stock,
or for other securities of any class, or for rights, warrants or options to
purchase stock or for script, or for securities of any kind convertible into
stock or carrying stock purchase warrants or privileges.
6. Liquidation. The board of directors may from time to time
distribute to the shareholders in partial liquidation, out of stated capital or
capital surplus of the Corporation, a portion of its assets, in cash or
property, subject to the limitations contained in the statutes of Colorado.
Appendix B-2
<PAGE>
ARTICLE V
BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by a board
of directors, which shall be elected at the annual meeting of the shareholders
or at a special meeting called for that purpose.
The initial board of directors shall consist of the following members,
who shall serve until the first annual meeting of shareholders and until their
successors are elected and qualified:
Director Address
Adrian P. Kirby 38 South Audley Street, Mayfair, London
W1Y 5DH, England
Peter N. Chapman Satley House, Satley, Bishop Auckland,
Co Durham DL13 4HU
Robert D. Evans 38 South Audley Street, Mayfair, London
W1Y 5DH, England
The number of directors may be increased or decreased from time to time
in the manner provided in the bylaws of the Corporation, but no decrease shall
have the effect of shortening the term of any incumbent director.
ARTICLE VI
REGISTERED AGENT AND REGISTERED OFFICE
The initial registered office of the Corporation shall be 1675
Broadway, Suite 1200, Denver, Colorado 80202, and the initial registered agent
at such address shall be CT Corporation System.
ARTICLE VII
INITIAL PRINCIPAL OFFICE
The address of the initial principal office of the Corporation shall be
38 South Audley Street, Mayfair, London W1Y 5DH, England.
ARTICLE VIII
DIRECTOR LIABILITY
To the fullest extent permitted by the Colorado Business Corporation
Act, as the same exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
Appendix B-3
<PAGE>
ARTICLE IX
INDEMNIFICATION
The Corporation shall indemnify any person and his estate and personal
representative against all liability and expense incurred by reason of the
person being or having been a director or officer of the Corporation to the full
extent and in any manner that directors may be indemnified under the Colorado
Business Corporation Act, as in effect at any time. The Corporation shall also
indemnify any person who is serving or has served the Corporation as director,
officer, employee, or agent, and that person's estate and personal
representative, to the extent and in the manner provided in any bylaw, contract,
resolution of the shareholders or directors, or otherwise, so long as such
provision is legally permissible.
ARTICLE X
NAME AND ADDRESS OF INCORPORATOR
The name and address of the incorporator is as follows:
Name Address
---- -------
Brian D. Lewandowski 717 17th Street, Suite 2900
Denver, Colorado 80202
Verified this 31st day of January 1996.
/s/ Brian D. Lewandowski
--------------------------------------
Brian D. Lewandowski, Incorporator
Appendix B-4
<PAGE>
APPENDIX C
----------
BYLAWS
OF
ATLANTIC INDUSTRIES, INC.
ARTICLE I
OFFICES
The principal office of the Corporation shall be designated from time
to time by the Corporation and may be within or outside of Colorado.
The Corporation may have such other offices, either within or outside
Colorado, as the board of directors may designate or as the business of the
Corporation may require from time to time.
The registered office of the Corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the board of directors.
ARTICLE II
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held during each year on a date and at a time fixed by the board of directors
of the Corporation (or by the president in the absence of action by the board of
directors), beginning with the year 1996, for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
If the election of directors is not held on the day fixed by the board of
directors for any annual meeting of the shareholders, or 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 it may conveniently be held.
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 (a) 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 (b) if
the shareholder participated in a proper call of or 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 the Colorado
Business Corporation Act, or the special meeting was not held in accordance with
the notice.
Section 2. Special Meetings. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the Corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by 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 3. Place of Meeting. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting or
any special meeting called by the board of directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or outside
Appendix C-1
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Colorado, as the place for such meeting. If no designation is made, or if a
special meeting is called other than by the board, the place of meeting shall be
the principal office of the Corporation.
Section 4. Notice of Meeting. Written notice stating the place, date
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except that (a) if the number of authorized
shares is to be increased, at least thirty days' notice shall be given, or (b)
any other longer notice period is required by the Colorado Business Corporation
Act. 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 (a) an amendment to the articles of
incorporation of the Corporation, (b) 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, (c) 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, (d) a
dissolution of the Corporation, or (e) any other purpose for which a statement
of purpose is required by the Colorado Business Corporation Act. Notice shall be
given personally or by mail, private carrier, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed and if in a comprehensible form, such notice
shall be deemed to be given and effective when deposited in the United States
mail, addressed to the shareholder at his address as it appears in the
Corporation's current record of shareholders, with postage prepaid. If notice is
given other than by mail, and provided that such notice is in a comprehensible
form, the notice is given and effective on the date received by the shareholder.
If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporate expense. 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.
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 at 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.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (a) notice of or vote at any meeting of shareholders or
any adjournment thereof, (b) receive distributions or share dividends, or (c)
demand a special meeting, or to make a determination of shareholders for any
other proper purpose, the board of directors may fix a future 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 no record
Appendix C-2
<PAGE>
date is fixed by the directors, the record date shall be the date on which
notice of the meeting is mailed to shareholders, or the date on which the
resolution of the board of directors providing for a distribution is adopted, as
the case may be. When a determination of shareholders entitled to vote at any
meeting of shareholders is made as provided in this Section, such determination
shall apply to any adjournment thereof unless the board of directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the Corporation. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
Section 6. Voting Lists. The secretary shall make, at the earlier of
ten days before each meeting of shareholders or two business days after notice
of the meeting has been given, a complete list of the shareholders entitled to
be given notice of such meeting or any adjournment thereof. The list shall be
arranged by voting groups and within each voting group by class or series of
shares, shall be in alphabetical order within each class or series, and shall
show the address of and the number of shares of each class or series held by
each shareholder. For the period beginning the earlier of ten days prior to the
meeting or two business days after notice of the meeting is given, and
continuing through the meeting and any adjournment thereof, this list shall be
kept on file at the principal office of the Corporation, or at a place (which
shall be identified in the notice) in the city where the meeting will be held.
Such list shall be available for inspection on written demand by any shareholder
(including for the purpose of this Section 6 any holder of voting trust
certificates) or his agent or attorney during regular business hours and during
the period available for inspection. The original stock transfer books shall be
prima facie evidence as to the shareholders entitled to examine such list or to
vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(a) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (b) the demand is made in good
faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (c) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(d) the records are directly connected with the described purpose, and (e) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
Corporation may certify in writing to the Corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (a) the types of
nominees to which it applies, (b) the rights or privileges that the Corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (c) the form of certification and the information to be
contained therein, (d) if the certification is with respect to a record date,
the time within which the certification must be received by the Corporation, (e)
the period for which the nominee's use of the procedure is effective, and (f)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the Corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. One-third of the votes entitled
to be cast on a matter by a voting group shall constitute a quorum of that
voting group for action on the matter. If less than one-third of such votes are
represented at a meeting, a majority of the votes so represented may adjourn the
meeting from time to time without further notice, for a period not to exceed 120
days for any one adjournment. If a quorum is present at such adjourned meeting,
any business may be transacted which might have been transacted at the meeting
as
Appendix C-3
<PAGE>
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, unless the meeting is
adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater number or voting by classes is required
by law or the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form (a document, such as a proxy card,
appointing the proxy) or similar writing, either personally or by his duly
authorized attorney-in-fact. A shareholder may also appoint a proxy (a document
granting another person the right to vote the shareholders shares) by
transmitting or authorizing the transmission of a telegram, teletype or other
electronic transmission providing a written statement of the appointment (the
grant of authority) 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
is 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.
An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest. An irrevocable proxy may nevertheless be revoked
where: (a) 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 authority under the appointment, or (b) 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 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 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 authority
under the appointment.
The Corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his 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.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the Corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
Section 10. Voting of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors, and
each fractional share shall be entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares
Appendix C-4
<PAGE>
of any class or classes are limited or denied by the articles of incorporation
as permitted by the Colorado Business Corporation Act. Cumulative voting shall
not be permitted in the election of directors or for any other purpose. Each
record holder of stock shall be entitled to vote in the election of directors
and shall have as many votes for each of the shares owned by him as there are
directors to be elected and for whose election he has the right to vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the Corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
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 the redemption price on
surrender of the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed 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:
1. the shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity;
2. 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;
3. 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;
4. the name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact or 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;
5. 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
6. 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 11.
Appendix C-5
<PAGE>
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 its officers nor any agent 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.
Section 12. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the Corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the Corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for determining
shareholders entitled to take action without a meeting is the date the
Corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the Corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the Corporation shall
be managed under the direction of, its board of directors, except as otherwise
provided in the Colorado Business Corporation Act or the articles of
incorporation.
Section 2. Number, Qualifications and Tenure. The number of directors
of the Corporation shall be fixed from time to time by the board of directors,
within a range of no less than 3 or more than 8. A director shall be a natural
person who is eighteen years of age or older. A director need not be a resident
of Colorado or a shareholder of the Corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act.
Section 3. Vacancies. Any director may resign at any time by giving
written notice to the Corporation. Such resignation shall take effect at the
time the notice is received by the Corporation unless the notice specifies a
later effective date. Unless otherwise specified in the notice of resignation,
the Corporation's acceptance of such resignation shall not be necessary to make
it effective. 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
Appendix C-6
<PAGE>
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 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 office for the unexpired term of
the last predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without notice 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 outside Colorado, for the
holding of additional regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any 2 directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or outside Colorado, as the place for holding
any special meeting of the board of directors called by them, provided that no
meeting shall be called outside the State of Colorado unless a majority of the
board of directors has so authorized.
Section 6. Notice. Notice of any special meeting shall be given at
least two days prior to the meeting by written notice either personally
delivered or mailed to each director at his business address, or by notice
transmitted by telegraph, telex, electronically transmitted facsimile or other
form of wire or wireless communication. If mailed, such notice shall be deemed
to be given and to be effective on the earlier of (a) three days after such
notice is deposited in the United States mail, properly addressed, with postage
prepaid, or (b) the date shown on the return receipt, if mailed by registered or
certified mail, return receipt requested. If notice is given by telex,
electronically transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be effective when
sent, and with respect to a telegram, such notice shall be deemed to be given
and to be effective when the telegram is delivered to the telegraph company. If
a director has designated in writing one or more reasonable addresses or
facsimile numbers for delivery of notice to him, notice sent by mail, telegraph,
telex, electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such director. Such waiver shall be
delivered to the Corporation for filing with the corporate records. Further, a
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless at the beginning of the meeting, or promptly
upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. 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.
Section 7. Quorum. A majority of the number of directors fixed by the
board of directors pursuant to Section 2 or, if no number is fixed, a majority
of the number in office immediately before the meeting begins, shall constitute
a quorum for the transaction of business at any meeting of the board of
directors. 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, for a period not to exceed sixty days at any one adjournment.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. Compensation. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the Corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
Appendix C-7
<PAGE>
Section 10. 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 (a) the director objects at the beginning of the
meeting, or promptly upon his 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, (b) the director contemporaneously
requests that his dissent or abstention as to any specific action taken be
entered in the minutes of the meeting, or (c) the director causes written notice
of his dissent or abstention as to any specific action to be received by the
presiding officer of 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.
Section 11. Committees. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have all
the authority of the board of directors, except that no such committee shall
have the authority to (a) authorize distributions, (b) approve or propose to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders, (c) fill vacancies on the board of directors
or any committee thereof, (d) amend articles of incorporation, (e) adopt, amend
or repeal the Bylaws, (f) approve a plan of merger not requiring shareholder
approval, (g) authorize or approve the reacquisition of shares unless pursuant
to a formula or method prescribed by the board of directors, or (h) authorize or
approve the issuance or sale of shares, or contract for the sale of shares or
determine the designations and relative rights, preferences and limitations of a
class or series of shares, except that the board of directors may authorize a
committee or officer to do so within limits specifically prescribed by the board
of directors. The committee shall then have full power within the limits set by
the board of directors to adopt any final resolution setting forth all
preferences, limitations and relative rights of such class or series and to
authorize an amendment of the articles of incorporation stating the preferences,
limitations and relative rights of a class or series for filing with the
Secretary of State under the Colorado Business Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 14 of these
Bylaws.
Section 12. Informal Action by Directors. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors entitled to vote with respect to the action taken. Such consent
shall have the same force and effect as a unanimous vote of the directors or
committee members and may be stated as such in any document. Unless the consent
specifies a different effective date, action taken under this Section 12 is
effective at the time the last director signs a writing describing the action
taken, unless, before such time, any director has revoked his consent by a
writing signed by the director and received by the president or the secretary of
the Corporation.
Section 13. Telephonic Meetings. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
Appendix C-8
<PAGE>
Section 14. Standard of Care. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the Corporation, and with the care an ordinarily prudent
person in a like position would exercise 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 the persons herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the Corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom 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 accountant, or other person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (c) a committee of the board of directors on which the director
does not serve if the director reasonably believes the committee merits
confidence.
ARTICLE IV
OFFICERS AND AGENTS
Section 1. General. The officers of the Corporation shall be a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be a natural person eighteen years of age or older. The board of
directors or an officer or officers authorized by the board may appoint such
other officers, assistant officers, committees and agents, including a chairman
of the board, assistant secretaries and assistant treasurers, as they may
consider necessary. The board of directors or the officer or officers authorized
by the board shall from time to time determine the procedure for the appointment
of officers, their term of office, their authority and duties and their
compensation. One person may hold more than one office. In all cases where the
duties of any officer, agent or employee are not prescribed by the bylaws or by
the board of directors, such officer, agent or employee shall follow the orders
and instructions of the president of the Corporation.
Section 2. Appointment and Term of Office. The officers of the
Corporation shall be appointed by the board of directors at each annual meeting
of the board held after each annual meeting of the shareholders. If the
appointment of officers is not made at such meeting or if an officer or officers
are to be appointed by another officer or officers of the Corporation, such
appointments shall be made as soon thereafter as conveniently may be. Each
officer shall hold office until the first of the following occurs: his successor
shall have been duly appointed and qualified, his death, his resignation, or his
removal in the manner provided in Section 3.
Section 3. Resignation and Removal. An officer may resign at any time
by giving written notice of resignation to the Corporation. The resignation is
effective when the notice is received by the Corporation unless the notice
specifies a later effective date.
Any officer or agent may be removed at any time with or without cause
by the board of directors or an officer or officers authorized by the board.
Such removal does not affect the contract rights, if any, of the Corporation or
of the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors, or
officer or
Appendix C-9
<PAGE>
officers authorized by the board of directors, may remove the officer at any
time before the effective date and may fill the resulting vacancy.
Section 5. President. Subject to the direction and supervision of the
board of directors, the president shall be the chief executive officer of the
Corporation, and shall have general and active control of its affairs and
business and general supervision of its officers, agents and employees. Unless
otherwise directed by the board of directors, the president shall attend in
person or by substitute appointed by him, or shall execute on behalf of the
Corporation written instruments appointing a proxy or proxies to represent the
Corporation, at all meetings of the stockholders of any other Corporation in
which the Corporation holds any stock. On behalf of the Corporation, the
president may in person or by substitute or by proxy execute written waivers of
notice and consents with respect to any such meetings. At all such meetings and
otherwise, the president, in person or by substitute or proxy, may vote the
stock held by the Corporation, execute written consents and other instruments
with respect to such stock, and exercise any and all rights and powers incident
to the ownership of said stock, subject to the instructions, if any, of the
board of directors. The president shall have custody of the treasurer's bond, if
any.
Section 6. Vice Presidents. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, or if the board makes no such designation,
then the vice president designated by the president, or if neither the board nor
the president makes any such designation, the senior vice president as
determined by first election to that office), shall have the powers and perform
the duties of the president.
Section 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 of meetings of shareholders
and of the board of directors or any committee thereof, (b) see 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 directors.
Assistant secretaries, if any, shall have the same duties and powers, subject to
supervision by the secretary. The directors and/or shareholders may, however,
respectively designate a person other than the secretary or assistant secretary
to keep the minutes of their respective meetings.
Any books, records or minutes of the Corporation may be in written form
or in any form capable of being converted into written form within a reasonable
time.
Section 8. Treasurer. The treasurer shall be the principal financial
officer of the Corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
Appendix C-10
<PAGE>
Corporation and shall deposit the same in accordance with the instructions of
the board of directors. He shall receive and give receipts and acquittances for
money paid in on account of the Corporation, and shall pay out of the
Corporation's funds on hand all bills, payrolls and other just debts of the
Corporation of whatever nature upon maturity. He shall perform all other duties
incident to the office of the treasurer and, upon request of the board, shall
make such reports to it as may be required at any time. He shall, if required by
the board, give the Corporation a bond in such sums and with such sureties as
shall be satisfactory to the board, conditioned upon the faithful performance of
his duties and for the restoration to the Corporation of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation. He shall have such other powers and
perform such other duties as may from time to time be prescribed by the board of
directors or the president. The assistant treasurers, if any, shall have the
same powers and duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
Corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
Corporation and the results of its operations.
ARTICLE V
STOCK
Section 1. Certificates. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
Corporation by one or more persons designated by the board of directors. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate is
issued, such certificate may nonetheless be issued by the Corporation with the
same effect as if he were such officer at the date of its issue. Certificates of
stock shall be in such form and shall contain such information consistent with
law as shall be prescribed by the board of directors. If shares are not
represented by certificates, within a reasonable time following the issue or
transfer of such shares, the Corporation shall send the shareholder a complete
written statement of all of the information required to be provided to holders
of uncertificated shares by the Colorado Business Corporation Act.
Section 2. Consideration for Shares. Certificated or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property of benefit to the Corporation,
including cash, promissory notes, services performed or other securities of the
Corporation. Future services shall not constitute payment or partial payment for
shares of the Corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the Corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
Appendix C-11
<PAGE>
Section 4. Transfer of Shares. Upon surrender to the Corporation or to
a transfer agent of the Corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the Corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the Corporation which shall be kept at
its principal office or by the person and the place designated by the board of
directors.
Except as otherwise expressly provided in Article II, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent provided in
the Colorado Business Corporation Act, the Corporation shall be entitled to
treat the registered holder of any shares of the Corporation as the owner
thereof for all purposes, and the Corporation shall not be bound to recognize
any equitable or other claim to, or interest in, such shares or rights deriving
from such shares on the part of any person other than the registered holder,
including without limitation any purchaser, assignee or transferee of such
shares or rights deriving from such shares, unless and until such other person
becomes the registered holder of such shares, whether or not the corporation
shall have either actual or constructive notice of the claimed interest of such
other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
Corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI
INDEMNIFICATION OF CERTAIN PERSONS
Section 1. Indemnification. For purposes of Article VI, a "Proper
Person" means 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, and whether formal or
informal, 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, partner, trustee, employee, fiduciary or
agent of any foreign or domestic profit or nonprofit corporation or of any
partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company, or other enterprise or employee benefit
plan. The Corporation shall indemnify any Proper Person against reasonably
incurred expenses (including attorneys' fees), judgments, penalties, fines
(including any excise tax assessed with respect to an employee benefit plan) and
amounts paid in settlement reasonably incurred by him in connection with such
action, suit or proceeding if it is determined by the groups set forth in
Section 4 of this Article that he conducted himself in good faith and that he
reasonably believed (a) in the case of conduct in his official capacity with the
Corporation, that his conduct was in the Corporation's best interests, or (b) in
all other cases (except criminal cases), that his conduct was at least not
opposed to the Corporation's best interests, or (c) in the case of any criminal
proceeding, that he had no reasonable cause to believe his conduct was unlawful.
A Proper Person will be deemed to be acting in his official capacity while
acting as a director, officer, employee or agent on behalf of this Corporation
and not while acting on this Corporation's behalf for some other entity.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a Corporation in which the Proper Person was
adjudged liable to the Corporation or in connection with any proceeding charging
that the Proper Person derived an improper personal benefit, whether or not
involving action in an official capacity, in which he was adjudged liable on the
basis that he derived an improper personal benefit. Further, indemnification
under this Section in connection with a proceeding brought by or in the right of
the Corporation shall be limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding.
Appendix C-12
<PAGE>
Section 2. Right to Indemnification. The Corporation shall indemnify
any Proper Person who was wholly successful, on the merits or otherwise, in
defense of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the Corporation other than the
determination in good faith that the defense has been wholly successful.
Section 3. Effect of Termination of Action. 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 seeking indemnification did not meet the standards
of conduct described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification Determination.
Except where there is a right to indemnification as set forth in Sections 1 or 2
of this Article or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the Corporation only as authorized in the
specific case upon a determination by a proper group that indemnification of the
Proper Person is permissible under the circumstances because he has met the
applicable standards of conduct set forth in Section 1 of this Article. This
determination shall be made by the board of directors by a majority vote of
those present at a meeting at which a quorum is present, which quorum shall
consist of directors not parties to the proceeding ("Quorum"). If a Quorum
cannot be obtained, the determination shall be made by a majority vote of a
committee of the board of directors designated by the board, which committee
shall consist of two or more directors not parties to the proceedings, except
that directors who are parties to the proceeding may participate in the
designation of directors for the committee. If a Quorum of the board of
directors cannot be obtained and the committee cannot be established, or even if
a Quorum is obtained or the committee is designated and a majority of the
directors constituting such Quorum or committee so directs, the determination
shall be made by (a) independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in this Section 4 or, if a
Quorum of the full board of directors cannot be obtained and a committee cannot
be established, by independent legal counsel selected by a majority vote of the
full board (including directors who are parties to the action) or (b) a vote of
the shareholders.
Section 5. Court-Ordered Indemnification. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If the court determines that such Proper Person
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he met the standards of conduct set forth in
Section 1 of this Article or was adjudged liable in the proceeding, the court
may order such indemnification as the court deems proper except that if the
Proper Person has been adjudged liable, indemnification shall be limited to
reasonable expenses incurred in connection with the proceeding and reasonable
expenses incurred to obtain court-ordered indemnification.
Section 6. Advance of Expenses. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the Corporation to any Proper Person in
advance of the final disposition of such action, suit or proceeding upon receipt
of (a) a written affirmation of such Proper Person's good faith belief that he
has met the standards of conduct prescribed by Section 1 of this Article VI, (b)
a written undertaking, executed personally or on the Proper Person's behalf, to
repay such advances if it is ultimately determined that he did not meet the
prescribed standards of conduct (the undertaking shall be an unlimited general
obligation of the Proper Person but need not be secured and may be accepted
without reference to financial ability to make repayment), and (c) a
determination is made by the proper group (as described in Section 4 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.
Appendix C-13
<PAGE>
Section 7. Witness Expenses. The sections of this Article VI do not
limit the Corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a time
when he has not been made a named defendant or respondent in the proceeding.
Section 8. Report to Shareholders. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the Corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
ARTICLE VII
PROVISION OF INSURANCE
By action of the board of directors, notwithstanding any interest of
the directors in the action, the Corporation may purchase and maintain
insurance, in such scope and amounts as the board of directors deems
appropriate, on behalf of any person who is or was a director, officer,
employee, fiduciary or agent of the Corporation, or who, while a director,
officer, employee, fiduciary or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, fiduciary or agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company or other enterprise or employee benefit
plan, against any liability asserted against, or incurred by, him in that
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of Article VI or applicable law. Any such insurance may be procured
from any insurance company designated by the board of directors of the
Corporation, whether such insurance company is formed under the laws of Colorado
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the Corporation has an equity interest or any other
interest, through stock ownership or otherwise.
ARTICLE VIII
MISCELLANEOUS
Section 1. Seal. The corporate seal of the Corporation shall be
circular in form and shall contain the name of the Corporation and the words,
"Seal, Colorado."
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
established by the board of directors.
Section 3. Amendments. 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.
Section 4. Gender. The masculine gender is used in these Bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
Section 5. Conflicts. In the event of any irreconcilable conflict
between these Bylaws and either the Corporation's articles of incorporation or
applicable law, the latter shall control.
Appendix C-14
<PAGE>
Section 6. Definitions. Except as otherwise specifically provided in
these Bylaws, all terms used in these Bylaws shall have the same definition as
in the Colorado Business Corporation Act.
The undersigned Secretary of the Corporation
hereby certifies that the foregoing Bylaws are
the Bylaws of the Corporation that were duly
adopted by the Board of Directors of the
Corporation on ____________________, 1996
______________________________________________
____________________, Secretary
Appendix C-15
<PAGE>
APPENDIX D
----------
NEW YORK BUSINESS CORPORATION LAW SECTION 623
623. Procedure to enforce shareholder's right to receive payment for shares
(a) A shareholder intending to enforce his right under a
section of this chapter to receive payment for his shares if the
proposed corporate action referred to therein is taken shall file with
the corporation, before the meeting of shareholders at which the action
is submitted to a vote, or at such meeting but before the vote, written
objection to the action. The objection shall include a notice of his
election to dissent, his name and residence address, the number and
classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is
not required from any shareholder to whom the corporation did not give
notice of such meeting in accordance with this chapter or where the
proposed action is authorized by written consent of shareholders
without a meeting.
(b) Within ten days after the shareholders' authorization
date, which term as used in this section means the date on which the
shareholders' vote authorizing such action was taken, or the date on
which such consent without a meeting was obtained from the requisite
shareholders, the corporation shall give written notice of such
authorization or consent by registered mail to each shareholder who
filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in
writing to the proposed action and who thereby is deemed to have
elected not to enforce his right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any
shareholder from whom written objection was not required and who elects
to dissent shall file with the corporation a written notice of such
election, stating his name and residence address, the number and
classes of shares as to which he dissents and a demand for payment of
the fair value of his shares. Any shareholder who elects to dissent
from a merger under section 905 (Merger of subsidiary corporation) or
paragraph (c) of section 907 (Merger or consolidation of domestic and
foreign corporations) or from a share exchange under paragraph (g) of
section 913 (Share exchanges) shall file a written notice of such
election to dissent within twenty days after the giving to him of a
copy of the plan of merger or exchange or an outline of the material
features thereof under section 905 or 913.
(d) A shareholder may not dissent as to less than all of the
shares, as to which he has a right to dissent, held by him of record,
that he owns beneficially. A nominee or fiduciary may not dissent on
behalf of any beneficial owner as to less than all of the shares of
such owner, as to which such nominee or fiduciary has a right to
dissent, held of record by such nominee or fiduciary.
(e) Upon consummation of the corporate action, the shareholder
shall cease to have any of the rights of a shareholder except the right
to be paid the fair value of his shares and any other rights under this
section. A notice of election may be withdrawn by the shareholder at
any time prior to his acceptance in writing of an offer made by the
corporation, as provided in paragraph (g), but in no case later than
sixty days from the date of consummation of the corporate action except
that if the corporation fails to make a timely offer, as provided in
paragraph (g), the time for withdrawing a notice of election shall be
extended until sixty days from the date an offer is made. Upon
expiration of such time, withdrawal of a notice of election shall
require the written consent of the corporation. In order to be
effective, withdrawal of a notice of election must be accompanied by
the return to the corporation of any advance payment made to the
shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall
determine that the shareholder is not entitled to receive payment for
his shares, or the shareholder shall otherwise lose his dissenters'
rights, he shall not have the right to receive
<PAGE>
payment for his shares and he shall be reinstated to all his rights as
a shareholder as of the consummation of the corporate action, including
any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have
expired or any such dividend or distribution other than in cash has
been completed, in lieu thereof, at the election of the corporation,
the fair value thereof in cash as determined by the board as of the
time of such expiration or completion, but without prejudice otherwise
to any corporate proceedings that may have been taken in the interim.
(f) At the time of filing the notice of election to dissent or
within one month thereafter the shareholder of shares represented by
certificates shall submit the certificates representing his shares to
the corporation, or to its transfer agent, which shall forthwith note
conspicuously thereon that a notice of election has been filed and
shall return the certificates to the shareholder or other person who
submitted them on his behalf. Any shareholder of shares represented by
certificates who fails to submit his certificates for such notation as
herein specified shall, at the option of the corporation exercised by
written notice to him within forty-five days from the date of filing of
such notice of election to dissent, lose his dissenter's rights unless
a court, for good cause shown, shall otherwise direct. Upon transfer of
a certificate bearing such notation, each new certificate issued
therefor shall bear a similar notation together with the name of the
original dissenting holder of the shares and a transferee shall acquire
no rights in the corporation except those which the original dissenting
shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period
within which shareholders may file their notices of election to
dissent, or within fifteen days after the proposed corporate action is
consummated, whichever is later (but in no case later than ninety days
from the shareholders' authorization date), the corporation or, in the
case of a merger or consolidation, the surviving or new corporation,
shall make a written offer by registered mail to each shareholder who
has filed such notice of election to pay for his shares at a specified
price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate
number of shares with respect to which notices of election to dissent
have been received and the aggregate number of holders of such shares.
If the corporate action has been consummated, such offer shall also be
accompanied by (1) advance payment to each such shareholder who has
submitted the certificates representing his shares to the corporation,
as provided in paragraph (f), of an amount equal to eighty percent of
the amount of such offer, or (2) as to each shareholder who has not yet
submitted his certificates a statement that advance payment to him of
an amount equal to eighty percent of the amount of such offer will be
made by the corporation promptly upon submission of his certificates.
If the corporate action has not been consummated at the time of the
making of the offer, such advance payment or statement as to advance
payment shall be sent to each shareholder entitled thereto forthwith
upon consummation of the corporate action. Every advance payment or
statement as to advance payment shall include advice to the shareholder
to the effect that acceptance of such payment does not constitute a
waiver of any dissenters' rights. If the corporate action has not been
consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price
per share to all dissenting shareholders of the same class, or if
divided into series, of the same series and shall be accompanied by a
balance sheet of the corporation whose shares the dissenting
shareholder holds as of the latest available date, which shall not be
earlier than twelve months before the making of such offer, and a
profit and loss statement or statements for not less than a twelve
month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period,
for the portion thereof during which it was in existence.
Notwithstanding the foregoing, the corporation shall not be required to
furnish a balance sheet or profit and loss statement or statements to
any shareholder to whom such balance sheet or profit and loss statement
or statements were previously furnished, nor if in connection with
obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy
or information statement, which included financial statements, pursuant
to Regulation 14A or Regulation 14C of the United States Securities and
Exchange Commission. If within thirty days after the making of such
offer, the corporation making the offer and any shareholder agree upon
the price to be paid for his shares, payment therefor shall be made
within sixty days after the
Appendix D-2
<PAGE>
making of such offer or the consummation of the proposed corporate
action, whichever is later, upon the surrender of the certificates for
any such shares represented by certificates.
(h) The following procedure shall apply if the corporation
fails to make such offer within such period of fifteen days, or if it
makes the offer and any dissenting shareholder or shareholders fail to
agree with it within the period of thirty days thereafter upon the
price to be paid for their shares:
(1) The corporation shall, within twenty days after
the expiration of whichever is applicable of the two periods
last mentioned, institute a special proceeding in the supreme
court in the judicial district in which the office of the
corporation is located to determine the rights of dissenting
shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new
corporation is a foreign corporation without an office in this
state, such proceeding shall be brought in the county where
the office of the domestic corporation, whose shares are to be
valued, was located.
(2) If the corporation fails to institute such
proceeding within such period of twenty days, any dissenting
shareholder may institute such proceeding for the same purpose
not later than thirty days after the expiration of such twenty
day period. If such proceeding is not instituted within such
thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise
direct.
(3) All dissenting shareholders, excepting those who,
as provided in paragraph (g), have agreed with the corporation
upon the price to be paid for their shares, shall be made
parties to such proceeding, which shall have the effect of an
action quasi in rem against their shares. The corporation
shall serve a copy of the petition in such proceeding upon
each dissenting shareholder who is a resident of this state in
the manner provided by law for the service of a summons, and
upon each nonresident dissenting shareholder either by
registered mail and publication, or in such other manner as is
permitted by law. The jurisdiction of the court shall be
plenary and exclusive.
(4) The court shall determine whether each dissenting
shareholder, as to whom the corporation requests the court to
make such determination, is entitled to receive payment for
his shares. If the corporation does not request any such
determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value
of the shares, which, for the purposes of this section, shall
be the fair value as of the close of business on the day prior
to the shareholders' authorization date. In fixing the fair
value of the shares, the court shall consider the nature of
the transaction giving rise to the shareholder's right to
receive payment for shares and its effects on the corporation
and its shareholders, the concepts and methods then customary
in the relevant securities and financial markets for
determining fair value of shares of a corporation engaging in
a similar transaction under comparable circumstances and all
other relevant factors. The court shall determine the fair
value of the shares without a jury and without reference to an
appraiser or referee Upon application by the corporation or by
any shareholder who is a party to the proceeding, the court
may, in its discretion, permit pretrial disclosure, including,
but not limited to, disclosure of any expert's reports
relating to the fair value of the shares whether or not
intended for use at the trial in the proceeding and
notwithstanding subdivision (d) of section 3101 of the civil
practice law and rules.
(5) The final order in the proceeding shall be
entered against the corporation in favor of each dissenting
shareholder who is a party to the proceeding and is entitled
thereto for the value of his shares so determined.
(6) The final order shall include an allowance for
interest at such rate as the court finds to be equitable, from
the date the corporate action was consummated to the date of
payment.
Appendix D-3
<PAGE>
In determining the rate of interest, the court shall consider
all relevant factors, including the rate of interest which the
corporation would have had to pay to borrow money during the
pendency of the proceeding. If the court finds that the
refusal of any shareholder to accept the corporate offer of
payment for his shares was arbitrary, vexatious or otherwise
not in good faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own
costs and expenses, including the fees and expenses of its
counsel and of any experts employed by it. Notwithstanding the
foregoing, the court may, in its discretion, apportion and
assess all or any part of the costs, expenses and fees
incurred by the corporation against any or all of the
dissenting shareholders who are parties to the proceeding,
including any who have withdrawn their notices of election as
provided in paragraph (e), if the court finds that their
refusal to accept the corporate offer was arbitrary, vexatious
or otherwise not in good faith. The court may, in its
discretion, apportion and assess all or any part of the costs,
expenses and fees incurred by any or all of the dissenting
shareholders who are parties to the proceeding against the
corporation if the court finds any of the following: (A) that
the fair value of the shares as determined materially exceeds
the amount which the corporation offered to pay; (B) that no
offer or required advance payment was made by the corporation;
(C) that the corporation failed to institute the special
preceding within the period specified therefor; or (D) that
the action of the corporation in complying with its
obligations as provided in this section was arbitrary,
vexatious or otherwise not in good faith. In making any
determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by
which the fair value of the shares as determined exceeds the
corporate offer.
(8) Within sixty days after final determination of
the proceeding, the corporation shall pay to each dissenting
shareholder the amount found to be due him, upon surrender of
the certificates for any such shares represented by
certificates.
(i) Shares acquired by the corporation upon the payment of the
agreed value therefor or of the amount due under the final order, as
provided in this section, shall become treasury shares or be cancelled
as provided an section 515 (Reacquired shares), except that, in the
case of a merger or consolidation, they may be held and disposed of as
the plan of merger or consolidation may otherwise provide.
(j) No payment shall be made to a dissenting shareholder under
this section at a time when the corporation is insolvent or when such
payment would make it insolvent. In such event, the dissenting
shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in
such event be deemed withdrawn with the written consent of the
corporation; or
(2) Retain his status as a claimant against the
corporation and, if it is liquidated, be subordinated to the
rights of creditors of the corporation, but have rights
superior to the non-dissenting shareholders, and if it is not
liquidated, retain his right to be paid for his shares, which
right the corporation shall be obliged to satisfy when the
restrictions of this paragraph do not apply.
(3) The dissenting shareholder shall exercise such
option under subparagraph (1) or (2) by written notice filed
with the corporation within thirty days after the corporation
has given him written notice that payment for his shares
cannot be made because of the restrictions of this paragraph.
If the dissenting shareholder fails to exercise such option as
provided, the corporation
Appendix D-4
<PAGE>
shall exercise the option by written notice given to him
within twenty days after the expiration of such period of
thirty days.
(k) The enforcement by a shareholder of his right to receive
payment for his shares in the manner provided herein shall exclude the
enforcement by such shareholder of any other right to which he might
otherwise be entitled by virtue of share ownership, except as provided
in paragraph (e), and except that this section shall not exclude the
right of such shareholder to bring or maintain an appropriate action to
obtain relief on the ground that such corporate action will be or is
unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section,
any notice to be given by a corporation to a shareholder under this
section shall be given in the manner provided in section 605 (Notice of
meetings of shareholders).
(m) This section shall not apply to foreign corporations
except as provided in subparagraph (e)(2) of section 907 (Merger or
consolidation of domestic and foreign corporations).
Appendix D-5
<PAGE>
PROXY CARD
LITTLE PRINCE PRODUCTIONS, LTD.
SPECIAL MEETING DATE: FEBRUARY 29, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned shareholder of Little Prince Productions, Ltd. (the
"Company"), a New York corporation, hereby constitutes and appoints Adrian P.
Kirby and Mark Littlejohn, and each of them, proxies, with full power of
substitution, for and on behalf of the undersigned to vote, as designated below,
according to the number of shares of the Company's $.01 par value common stock
held of record by the undersigned on February 7, 1996, and as fully as the
undersigned would be entitled to vote if personally present, at the Special
Meeting of Shareholders to be held at 38 South Audley Street, Mayfair, London
W1Y 5DH, England on Thursday, February 29, 1996 at 9:30 a.m. local time, and at
any postponements or adjournments thereof.
You have the opportunity to separately vote on Proposals 1 through 4
below, however, Proposals 1 and 2, and Proposals 3 and 4 are mutually contingent
upon shareholder approval of each other. For example, if shareholders approve
Proposal 1 but fail to approve Proposal 2, or approve Proposal 2 but fail to
approve Proposal 1, neither Proposal 1 nor Proposal 2 will be adopted. The same
result will occur in the event shareholders approve Proposal 3 but fail to
approve Proposal 4; or approve Proposal 4 but fail to approve Proposal 3.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned. If properly executed and no direction is made, this
proxy will be voted FOR each of the Proposals set forth on this Proxy.
Please mark boxes x in ink. Sign, date and return this Proxy promptly, using the
enclosed envelope.
1. Proposal to approve a change in the Company's state of incorporation
from New York to Colorado y means of a merger of the Company into
Atlantic Industries, Inc. a newly organized Colorado corporation wholly
owned by the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to approve the terms of the merger agreement governing the
merger of the Company into Atlantic Industries, Inc., which provides
for, among other things, a 10 for 1 reverse stock split and an increase
in the number of authorized shares from 25,000,000 to 50,000,000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to consent to and grant the Board of Directors authority,
pursuant to its legally imposed fiduciary duties, to sell the common
stock of LPPL Corp., the Company's wholly owned subsidiary.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to consent to and grant the Board of Directors authority,
pursuant to its legally imposed fiduciary duties, to vote to dissolve
LPPL Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of a Special
Meeting of Shareholders, dated February 9, 1996 and the Proxy Statement
furnished therewith.
Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. Executors, administrators, trustees and other
fiduciaries, and persons signing on behalf of corporations or partnerships,
should so indicate when singing.
Dated _______________________________________, 1996
___________________________________________________
Authorized Signature
___________________________________________________
Title
___________________________________________________
Authorized Signature
___________________________________________________
Title
To save the Company additional vote solicitation expenses, please sign,
date and return this Proxy promptly, using the enclosed envelope.
NON-VOTING INSTRUCTIONS
[ ] MEETING. Please check here to indicate that you plan to attend the
Special Meeting of Shareholders on Thursday, February 29, 1996.
