SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File Number 0-9455
ATLANTIC INDUSTRIES, INC.
(Name of small business issuer in its charter)
Colorado 13-3045713
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
38 South Audley Street
Mayfair, London, England W1Y 5DH
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (4471) 629-7617
Little Prince Productions, Ltd.
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(Former name, former address and former fiscal year, if changed since
last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.01 par value
----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of the Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for the year ended December 31, 1996 $-0-.
The aggregate market value of voting stock held by nonaffiliates of the
Company as of February 14, 1997 was -0-.
The number of shares of the Company's $.01 par value common stock
outstanding as of February 14, 1997 was 192,996.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Little Prince Productions, Ltd. ("Little Prince"), was incorporated on
April 3, 1980 pursuant to the laws of the State of New York, and was originally
formed to exploit certain ancillary and subsidiary rights to the literary work
entitled "The Little Prince." Subsequent to its organization the Company changed
its business focus. See "-Background of Company's Operations" below. As used in
this report the term "Company" refers to Little Prince prior to December 6, 1996
and to Atlantic (as defined below) as of and subsequent to December 6, 1996.
On February 29, 1996, the Company held a Special Meeting of
Shareholders (the "Meeting"). At the Meeting the Company's shareholders, by an
affirmative vote of approximately 76% of the total shares outstanding, adopted
the following proposals: (i) a change in the Company's state of incorporation
from New York to Colorado by means of a merger (the "Merger") of the Little
Prince into the Atlantic Industries, Inc. ("Atlantic"), a Colorado corporation
organized on January 31, 1996, which was wholly owned by Little Prince at the
time of the merger; (ii) the terms of the merger agreement which provided for,
among other things, a 10 for 1 reverse stock split and an increase in the number
of authorized shares of the Company after the Merger to 50,000,000; (iii)
consented and authorized the Board of Directors (the "Board"), at the Board's
discretion, to (a) sell the Company's interest in the common stock of its wholly
owned subsidiary, LPPL Corp., to an independent third-party or (b) vote to
dissolve LPPL Corp.
The number of votes cast for, against or that abstained from each of
the above proposals is set forth below:
Description For Against Abstain
----------- --- ------- -------
Proposal 1 19,036,766 124,350 160
Proposal 2 19,036,766 124,350 160
Proposal 3 19,036,766 124,350 160
Proposal 4 19,036,666 124,450 160
On December 6, 1996, the Merger became effective (the "Effective
Date"). The delay in the effective date of the Merger was primarily due to the
need to prepare the Company's past due income and franchise tax reports for the
State of New York. By operation of law on the Effective Date, all assets,
property, rights, liabilities and obligations of Little Prince were transferred
to and assumed by Atlantic. The principal effect of the Merger was to (i) change
the law applicable to the Company's corporate affairs from the New York Business
Corporation Law to the Colorado Business Corporation Act, (ii) reduce the number
of shares of the Company's $.01 par value
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common stock (the "Shares" or the "Common Stock") issued and outstanding, and
(iii) increase the number of Shares authorized for issuance.
Specifically, on the Effective Date, the Company was authorized to
issue 50,000,000 shares of capital stock (the "Capital Stock"). Of the Capital
Stock reserved for issuance 40,000,000 shares are reserved for issuance as
Common Stock, of which 2,499,923 shares were outstanding at that time, and
10,000,000 shares were reserved for issuance as preferred stock ("Preferred
Stock"), of which no shares were outstanding.
Sale of LPPL Corp.
Pursuant to the authority granted to it by the shareholders at the
Meeting, on July 22, 1996 the Board authorized the sale of its ownership
interest in all of the issued and outstanding capital stock of LPPL Corp. (the
"LPPL Shares") to Frances Katz Levine, an independent third party, pursuant to
that certain Stock Purchase Agreement (the "Agreement") dated July 22, 1996. As
consideration for the LPPL Shares, the Company received $10 and Ms. Levine's
agreement to use her best efforts to effect and complete by July 21, 1997, at no
cost to the Company, the reincorporation of LPPL Corp. under the state of
Delaware. Concomitantly therewith, Ms. Levine agreed to increase the number of
shares of authorized capital stock of LPPL Corp. and distribute the shares of
common stock of LPPL Corp. to the shareholders of the Company as of July 22,
1996 at a ratio of one LPPL Share for every one share of Common Stock of the
Company (or such other ratio as required by the attendant circumstances) in
accordance with the requirements of all applicable federal and state securities
laws and regulations. In the event Ms. Levine fails to complete the above
actions by July 21, 1997, the Agreement requires Ms. Levine to immediately take
all steps necessary to dissolve LPPL Corp. and deliver any assets remaining
after dissolution, if any, to the Company.
Developments Subsequent to December 31, 1996
On February 12, 1997 the Company held a Special Meeting of Shareholders
(the "1997 Meeting"). At the 1997 Meeting the Company's shareholders, by an
affirmative vote of approximately 74% of the total shares outstanding, adopted a
proposal to effect a reverse stock split of up to twenty-for-one of the
presently issued and outstanding shares of Common Stock. At the 1997 Meeting,
shareholders owning (i) 2,853,588 (74%) shares of Common Stock voted for the
proposal, (ii) 210 shares of Common Stock voted against the proposal, and (iii)
140 shares of Common Stock abstained. The reverse stock split allowed the Board
to abandon the reverse stock split or the split to be reduced to something less
than twenty-for-one by action of the Board at any time after the 1997 Meeting
and prior to February 12, 1998 if the Board determined, in its sole discretion,
that the reverse stock split would not be in the best interests of the Company
or that a different ratio (but not greater than twenty-for-one) would be in the
best interest of the Company.
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On February 13, 1997, the Company filed an amendment to its Articles of
Incorporation making effective a twenty-for-one reverse stock split. The filing
of the amendment resulted in a decrease in the number of outstanding Shares to
approximately 192,996 and, since the number of Shares available for issuance
remained at 40,000,000, increased the number of Shares available for issuance
from approximately 36,140,077 to 39,807,004.
Background of Company's Operations
Tyne River Properties Acquisition.
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 (the "Acquisition
Shares"), comprising, upon issuance, approximately 85% of the issued and
outstanding Common Stock, in exchange for all of the issued and outstanding
capital stock of TRP. As a part of the Reverse Acquisition, the Company's
theatrical operations and assets were transferred and assigned to its wholly
owned subsidiary, LPPL Corp. to be continued therein under the direction of A.
Joseph Tandet. At this time (i) Mr. Tandet resigned his position as President of
the Company and was appointed President of LPPL Corp., and (ii) Peter N. Chapman
was appointed as an executive officer and Director of the Company. As a further
consequence of the Reverse Acquisition, on February 4, 1993 the Company changed
its fiscal year end from March 31 to December 31 to coincide with the fiscal
year end 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 the Company
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.
TRP was, from its inception in 1987 through March 29, 1994, engaged in
the acquisition and development of property in the Newcastle-Upon-Tyne area in
England. It conducted its business directly and indirectly through its operating
subsidiaries, Exchange Buildings Limited ("EBL"), Pandon Developments Limited
("PDL"), and Selective Construction plc ("SCP"). Its development sites included
the Pandon and Exchange Building sites in central Newcastle-Upon- Tyne, among
others.
After the Reverse Acquisition, the Company was not able to raise any
funds through private or public sales of its securities, or otherwise, TRP was
therefore unable to institute its real estate investment business plan and the
lack of available working capital resulted in the Company's overall inability to
conduct operations in any of its three proposed business segments during 1993 or
subsequently thereto, except on a minimal level.
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Riparian Group Acquisition.
Commencing in January of 1994, the Riparian Group (as defined below)
had begun to explore the feasibility of acquiring a major stock position in, and
management control of, the Company. They were interested in a publicly traded
corporation because they believed it would be an effective vehicle for the
effectuation of their proposed business plan. In the interest of such potential
affiliation with the Company, the Riparian Group agreed with TRP to use its best
efforts to protect the Company from the anticipated adverse effects of the
dissolution of TRP's subsidiaries, and the liquidation of properties held
thereby, under the unfavorable conditions then obtaining.
On March 29, 1994, the Company sold all of the issued and outstanding
stock of TRP to Bravecorp Limited ("Bravecorp"), a U.K. company wholly owned by
Riparian Investments Limited ("RIL") and formed specifically for the purpose of
purchasing TRP for the nominal consideration of (pound)1. RIL is a company
affiliated with Riparian Securities Limited ("RSL") through common ownership and
management (RIL and RSL, as well as their controlling persons, will sometimes be
referred to herein, collectively, as the "Riparian Group").
On April 15, 1994, Barclays Bank which had previously loaned funds to
TRP, foreclosed on EBL and took legal possession of the Exchange Building. On
April 18, 1994, Bravecorp sold EBL to Lacebury Limited, a firm which specializes
in dealing with insolvent companies, for a price of (pound)2. On April 26, 1994,
Bravecorp sold all of the remaining assets of TRP, except for PDL (and the
Pandon Development owned by PDL) to Lacebury Limited for a price of (pound)2. At
approximately the same point in time, Bravecorp sold PDL for the same nominal
sum to Gracelord Limited ("Gracelord"). Neither Lacebury nor Gracelord was
affiliated with the Company, the Riparian Group, or any affiliate of Registrant
or the Riparian Group. At the time of Bravecorp's purchase of TRP, the Riparian
Group was not affiliated with the Company and all of the foregoing transactions
were made at arm's-length. In connection with their services in respect of the
foregoing transactions and dealing with outstanding creditors and the
appointment of company receivers and liquidators, Bravecorp incurred
unreimbursed expenses of approximately (pound)3,525 (approximately $5,000).
On August 22, 1994, the Company entered into an agreement (the "RSL
Agreement") with RSL.
The RSL Agreement principally provided for:
(a) a loan by RSL to the Company of GB(pound)25,000, to be
used to satisfy financial, tax and regulatory obligations of
Registrant;
(b) the sale by the Company to RSL of 3,250,000 newly issued
shares of Common Stock at a price of $.0001 per share in conjunction
with the sale by Peter N.
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Chapman and William J. Peacock to RSL of an additional 2,990,402 shares
for the nominal price of $.0001 per share;
(c) the resignation of four of the five then present directors
of Registrant, pursuant to which Terence G. Galgey, William J. Peacock,
A. Joseph Tandet, and Carl Kuehner resigned as directors of Registrant,
which resignations became effective as of October 1, 1994;
(d) 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
(e) the resignations of Messrs. Galgey, Peacock, Tandet, and
Kuekner as officers of Registrant, which resignations became effective
as of October 1, 1994.
The closing of the RSL Agreement took place on September 9, 1994. The
newly constituted board of directors took office on October 1, 1994. Thereafter,
Adrian P. Kirby was appointed as Chairman and Chief Executive Officer of the
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. Mr. Evans subsequently resigned as
a director and executive vice president of the Company on December 19, 1996.
Proposed Business Plan of RSL. 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").
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. 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"). Upon completing these reports, in an
effort to restore the profitability of the Company, the Board adopted a plan of
reorganization which was presented and approved by the Company's shareholders at
the Meeting held on February 29, 1996.
5
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The Company's Business Plan
The Company's current focus is on acquiring service or manufacturing
businesses, as well as developing, selling, leasing and managing real estate in
the United Kingdom, the United States and other foreign countries. 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.
The Company's current acquisition strategy involves the possibility of
acquiring, in exchange for the Capital 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 the Capital Stock of the
Company. See "Description of Property" for a description of the Company's
investment strategies.
Competition
Management believes that the Company may face competition for the most
attractive real estate investment opportunities from other investors who are
aware of the opportunities available at this time to purchase properties at
significantly deflated prices. Other investors, substantially all of whom have
greater resources than the Company, are in the market for real estate investment
and present intense competition due to their being considerably better
established and larger than the Company in total assets and resources. There
cannot be any assurance that the Company will, in fact, be able to raise equity
capital on terms favorable to it or at times necessary to enable it to take
advantage of attractive real estate investment opportunities against potential
competitors.
Personnel
During the fiscal year ended December 31, 1996, the Company had no
employees other than its executive officers.
ITEM 2. DESCRIPTION OF PROPERTY
The executive offices of the Company have been maintained at the office
of Mr. Kirby at 38 South Audley Street, Mayfair, London, England W1Y 5DH. The
Company has no formal lease or agreement with respect to its office facilities
and pays no rent or other remuneration for their use.
Nature of Investments/Investment Strategy
The Company 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
6
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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.
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 its Capital Stock in public or
private transactions. The Company's shareholders do not and will not have any
preemptive rights with respect to any such issues of Capital Stock. Moreover,
there can be no assurance that the Company will be able to raise any funds
through the sale of Capital 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 in addition to short, intermediate or
long-term borrowings, on 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.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings to which the Company (or any officer or
director of the Company, or any affiliate as owners of record or beneficially of
more than 5% of the Common Stock) to management's knowledge, is a party or to
which the property of the Company is subject, is pending and no such material
proceedings are known by management of the Company to be contemplated.
7
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended December 31, 1996,
no matters were submitted to a vote of security holders. The Company, however,
did hold the Special Meeting of Shareholders on February 12, 1997. See
"Description of Business-Developments Subsequent to December 31, 1996."
8
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock 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 the National Association of Securities Dealers'
Automated Quotation System ("NASDAQ"), it was delisted therefrom, effective May
27, 1992. Since such date, the Common Stock has been quoted on the OTC Bulletin
Board. The Company has been advised that no dealer has submitted bid prices for
the Common Stock since April, 1994.
On December 31, 1996, the Company authorized the issuance of 1,360,000
shares of Common Stock to the Patchouli Foundation in payment for loans made by
the Patchouli Foundation to the Company. Pursuant to Section 4(2) of the
Security Act of 1933, as amended (the "Act"), the issuance of the 1,360,000
shares was exempt from the registration requirements of the Act. See "Certain
Relationships and Related Transactions."
As of February 14, 1997, there were 340 record holders of the Common
Stock. The Company has not declared or paid any form of dividends on the Common
Stock during the last two fiscal years and does not contemplate declaring any
and paying any dividends on the Common Stock in the near future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with the
Company's financial statements and notes thereto included elsewhere in this
report.
The statements contained in this report, if not historical, are forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, and involve risks and uncertainties that could cause actual
results to differ materially from the results, financial or otherwise, or other
expectations described in such forward-looking statements. These risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business include those, among others, discussed below
and under "Description of Business-The Company's Business Plan," "-Competition"
and "Description of Property-Nature of Investments/Investment Strategy." Any
forward looking statement or statements speak only as of the date on which such
statement was made, and the Company undertakes no obligation to update any
forward looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. Therefore, forward-looking statements should not be relied
upon as a prediction of actual future results.
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Results of Operations
Balance sheet amounts originally denominated in United Kingdom sterling
have been translated into U.S. dollars using the year-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.
Fluctuations in foreign exchange rates could have either negative or positive
impacts on the Company's balance sheet and results of operations.
During the fiscal year ended December 31, 1996, the Company was largely
inactive except for administrative activities in connection with the preparation
and filing of periodic reports required under Section 13 of the Securities
Exchange Act of 1934, as amended, and in preparing current and past due
corporate income tax and franchise tax reports for the State of New York in
order to effectuate the Merger. All filings are now up to date. The majority of
the operating costs of $26,545 incurred during the 1996 fiscal year,
respectively, related specifically to the audit, accounting, secretarial and
legal costs associated with the preparation of the aforementioned documentation.
In an effort to restore the profitability of Little Prince, the Board
adopted a plan or reorganization which, among other things, resulted in the
merger of Little Prince into the Company and increased the number of shares of
Capital Stock authorized for issuance. See "Description of Business-General."
The Board believed the additional authorized but unissued shares of Capital
Stock were necessary in order for the Company to improve its financial affairs
by givingthe Board increased flexibility in structuring future financings and
acquisitions. Subsequent to the December 31, 1996, the Board authorized and the
Company's shareholders approved an additional reverse stock split. See
"-Liquidity and Capital Resources" below.
As discussed above under "Description of Business-The Company's
Business Plan," 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
previous litigious history of LPPL Corp. and its uncertain profitability the
Board believed that it was in the Company's best interest to relinquish its
interest in LPPL Corp. See "Description of Business-General." Accordingly, on
July 22, 1996, the Company sold all of the shares of LPPL Corp. The Company's
gain on the disposition of LPPL Corp. of $150,630 is deferred and will be
recognized upon the completion of the dispositions, which is expected to occur
in July of 1997.
On December 31, 1997, the Company reduced its accounts payable by
approximately $170,000 through the issuance of 1,360,000 shares of Common Stock
to the Patchouli Foundation ("Patchouli"). This issuance of the additional
Shares to the Patchouli resulted in a Pathcouli having effective control of the
Company by increasing its percentage ownership of Common Stock from 25% to
51.4%. See "Certain Relationships and Related Transactions."
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Liquidity and Capital Resources
As a result of the sale of LPPL Corp., the Company currently has no
income producing assets. The Company is dependent in the short term from
continued loans from Patchouli. As stated above, the Company intends to acquire
through the issuance of additional shares of Capital Stock a suitable business
or businesses and/or to obtain additional funds through the sale of Common Stock
or Preferred Stock in public or private transactions. The Company's investment
strategy is set forth under "Description of Property-Nature of
Investments/Investment Strategy."
After the merger of Little Prince into the Company, the Board believed
that its ability to acquire suitable income producing properties was still
limited by the number of Shares outstanding at the end of the Company's fiscal
year. For example, an arbitrarily assigned value of $5.00 per Share for purposes
of conducting a reverse acquisition would indicate that the Company had a
capitalization of $20 million, with the current number of Shares then
outstanding. Because the Shares are currently valueless, the person selling the
business in return for Shares would recognize a substantial dilution in the
value of the Shares such person received. Under the same scenario, after giving
effect to a reverse stock split of twenty-for-one, the Company's hypothetical
capitalization would decrease to approximately $1 million and the person selling
the business would recognize a less substantial dilution in the value of its
Shares. Although, the above example is hypothetical and meant only for
illustrative purposes to reflect the current difficulties the Company faced in
attempting to locate a viable business or assets to acquire, the Company
believed that the twenty-for-one reverse stock split that became effective on
February 13, 1997, would enhance the Company's ability to enter into potential
acquisitions in the future.
The Company can not provide any assurances that the reverse stock
spit will enable it to acquire a suitable business, businesses or assets in the
future. In addition, the Company can not provide any assurance as to the value
per Share a person interested in selling its business or assets in exchange for
Shares would demand or accept.
The Company had no material commitments for capital expenditure for the
period ended December 31, 1996.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the company required by Regulation S-B are
attached to this Report. Reference is made to Item 13 below for an "Index to
Financial Statements."
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors and Executive Officers During the Year Ended December 31, 1996.
The table below sets forth the persons who were the directors and executive
officers of the Company during the year ended December 31, 1996 together with
their respective ages, their respective dates of service, the year in which each
was first elected or appointed an officer or director, and any other office in
the Company held by each such person. All persons who served as officers of the
Company during this period also served as executive officers.
<TABLE>
<CAPTION>
Officer and Director
---------------------------------------
Name of Director Other Offices Held Age From To
- ---------------- ------------------ --- ---- --
<S> <C> <C> <C> <C>
Adrian P. Kirby(1) Chief Executive Office, 38 October 1, 1994 Present
Chairman, President
Peter N. Chapman Treasurer, Secretary 41 November 16, 1992 Present
</TABLE>
- ---------------
(1) Mr. Kirby took office on October 1, 1994 in connection with RSL's
acquisition of approximately 25% of the Company's issued and outstanding common
stock.
(2) On December 19, 1996, the Company accepted the resignation of Mr. Robert D.
Evans as a director and executive vice president of the Company.
Messrs. Kirby and Chapman, the Company's current officers and
directors, devote such of their time to the Company's business and affairs as is
required for their executive duties and meetings of the Board of Directors.
Family Relationships
No family relationship exists between any director or executive officer
of the Company or person contemplated to become such.
Business Experience
The following summarizes the present occupation and business experience
during the past five years for each person who is currently a director or
executive officer of the Company. No other persons have been nominated or chosen
to become a director of the Company.
Adrian P. Kirby has been the President, Chief Executive Officer and
Chairman of the Board of Directors of the Company since October 1, 1994. He was
a founder and is a major
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shareholder of Atlantic Properties, Ltd., and has served as a Director and as
Treasurer of such corporation since its inception on February 15, 1995. In 1993,
Mr. Kirby founded The Riparian Group, consisting of Riparian Securities, Ltd.,
Riparian Investments, Ltd. ("RIL"), and Riparian Properties, Ltd. Mr. Kirby
served as the Chief Executive Officer of all of the constituent corporations of
the Riparian Group until his resignation therefrom in March of 1995. In 1984,
Mr. Kirby incorporated Guardacre Investments Limited, and subsequently,
Guardacre Securities and Guardacre Properties Limited. Collectively, these
corporations were known as the "Guardacre Group." From 1984 through November
1993, Mr. Kirby was the Chief Executive Officer of the Guardacre Group.
Peter N. Chapman has served as Treasurer, Secretary, and a Director of
the Company from November 16, 1992 through the present. He also served as a
Director and the Secretary of TRP from 1986 until March 29, 1994. On April 15,
1994, Barclays Bank foreclosed on Exchange Buildings, Ltd., a principal
subsidiary of TRP. Chapman has been employed as a chartered accountant since
1979. He has been self employed since 1990, first independently and subsequently
as a partner in Chapman & Chapman, a firm of chartered accountants. From 1988
through January 1990, Mr. Chapman worked for William A. Swales Limited where,
commencing in January 1989, he served as Finance Director. Effective November
16, 1992, Mr. Chapman was appointed as an officer and director of LPPL Corp., a
wholly owned subsidiary of the Company until July 22, 1996. Mr. Chapman was
admitted as a Fellow of the Institute of Chartered Accountants in England and
Wales in 1979.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission and with the NASDAQ and to furnish the Company with copies.
Based on its review of the copies of the Section 16(a) forms received
by it, or written representations from certain reporting persons, the Company
believes that, during the last fiscal year, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with, except as set forth below:
Mr. Kirby, the Chairman of the Board, President and Chief
Executive Officer of the Company, the Patchouli Foundation
("Patchouli") and Dr. Christoph Hoffmann, administrator for the
Patchouli Foundation, failed to file a Form 3 reporting their ownership
of 6,240,402 shares of Common Stock on October 7, 1994, with respect to
Mr. Kirby, and January 14, 1995, with respect to Patchouli and Mr.
Hoffmann. In addition, such parties failed to timely file a Form 4
reporting the issuance of an additional 1,360,000 shares of Common
Stock on December 31, 1996. The above parties correctly reported these
transactions on a Form 5 timely filed on February 14, 1997.
13
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Current Remuneration
The Company has no stock option or stock appreciation rights, long term
or other incentive compensation plans, deferred compensation plans, stock bonus
plans, pension plans, or any other type of compensation plan in place for its
executive officers, directors, or other employees and none of its executive
officers or directors have ever received compensation of any such types from the
Company pursuant to plans or otherwise.
The following table sets forth information concerning the annual
compensation received or accrued for services provided in all capacities to the
Company for the years ended December 31, 1996, 1995 and 1994 by the Company's
chief executive officer. None of the Company's executive officers received or
accrued annual compensation in excess of $100,000 in any of such years. All of
the Company's current executive officers have agreed to render services to the
Company solely for the purpose of enhancing the value of their shareholdings in
the Company, until such time as the Company has the financial resources
available to compensate such persons for their services.
Summary Compensation Table
Annual All Other
Compensation Compensation
------------ ------------
Fiscal Year
Name Position December 31, Salary
---- -------- ------------ ------
Adrian P. Kirby(1) President 1996(2) $ -0- $ -0-
and CEO
- ---------------
(1) Mr. Kirby became president and chief executive officer of the Company on
October 1, 1994. Mr. Kirby has agreed to render his services to the Company
solely for the purpose of enhancing the value of the shareholdings of the
Patchouli Foundation in the Company until such time as the Company has the
financial resources available to compensate him for his services.
(2) On December 31, 1996, the Patchouli Foundation ("Patchouli") received
1,360,000 shares of Common Stock in exchange for the cancellation of the debt of
$170,000 owed to Patchouli by the Company. 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. The purpose of this transaction was
not to pay Mr. Kirby compensation for his services as an executive officer of
the Company. See "Certain Relationships and Related Transactions."
Directors Remuneration
The directors of the Company are not compensated for their services as
such.
14
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of outstanding Common Stock as of February 14, 1997, by (i)
each person known by the Company to own beneficially five percent or more of the
outstanding shares of Common Stock, (ii) the Company's directors, Chief
Executive Officer and executive officers whose total compensation exceeded
$100,000 for the last fiscal year, and (iii) all directors and executive
officers of the Company as a group.
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
------------------- -------------------- ----------------
Patchouli Foundation 99,202(1) 51.4%
c/o Hans Zum Elefant
Kirchgasse 3/5
Postfach 8024
Zurich
Adrian P. Kirby, Chairman of the 99,202(1) 51.4
Board, CEO and President
38 South Audley Street
Mayfair, London
England W1Y 5DH
Terence G. Galgey 11,250 5.8
27 John Adam Street
London, England WC2N 6HX
Peter N. Chapman, Director, CFO 1,625 *
and Secretary
38 South Audley Street
Mayfair, London
England W1Y 5DH
All executive officers and directors 100,827 52.2
as a group (2 persons).
15
<PAGE>
- ------------------
(1) Includes 99,202 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.
* Indicates less than 1% beneficial ownership
** Calculated on the basis of 192,996 Shares outstanding on February 14, 1997.
Changes in Control
The Company is not aware of any existing arrangements that may result
in a change in control of the Company at this time. A change in control of the
Company could occur in the future if the Company locates a suitable business or
assets to acquire.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions and Business Relationships with Management
Since 1994, the Patchouli Foundation ("Patchouli") 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-KSB, Quarterly Reports on Form 10-Q, proxy statements and state
income tax returns. Patchouli is a non-discretionary family trust, governed by
Liechtenstein law, set up for the benefit of the family of Adrian P. Kirby, the
Chairman of the Board, Chief Executive Officer and President of the Company. 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 Patchouli.
As of December 31, 1996, Patchouli had advanced to the Company $170,000
(the "Patchouli Advance"). On December 31, 1996, the Board unanimously
authorized the issuance of 1,360,000 shares of Common Stock to Patchouli in
payment for the Patchouli Advance. As a result of this exchange, Patchouli
became the beneficial owner of 51.4% of Common Stock issued and outstanding.
Although the Common Stock currently has no value, the Board valued the Common
Stock at a price of $.125 per share for purposes of determining the number of
Shares Patchouli would receive as payment for the Patchouli Advance. The Board
believed that the offered price of $.125 per share was fair and reasonable to
the Company and its shareholders.
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
16
<PAGE>
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.
17
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report.
Financial Statements. See Index to Financial Statements on page F-1 of
this Report.
Exhibits. Exhibits filed as part of this report are as follows (for
electronic filing purposes only, this report contains Exhibit 27,
Financial Data Schedule):
Exhibit No. Description
- ----------- -----------
2.1(1) Agreement and Plan of Merger dated February 9, 1996, between the
Company and Atlantic Industries, Inc.
2.2* Certificate of Merger of Little Prince Productions, Ltd., a New
York corporation into Atlantic Industries, Inc., a Colorado
corporation, dated March 29, 1996, under Section 907 of the New
York Business Corporation Law.
2.3* Articles of Merger of Little Prince Productions, Ltd., a New
York corporation into Atlantic Industries, Inc., under Section
7-111-107 of the Colorado Business Corporation Act.
3.1* Articles of Incorporation of Atlantic Industries, Inc., as
amended
3.2* Amended and Restated Bylaws of Atlantic Industries, Inc.
4.1 A description of the rights of the Company's shareholders is
contained in the Articles of Incorporation, as amended, filed as
Exhibit 3.1 and is incorporated herein by reference.
27* Financial Data Schedule
- ---------------
*Filed herewith.
(1) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Form 10-K, dated December 31, 1995, which exhibit is incorporated
herein by reference.
(b) Reports on Form 8-K
On January 14, 1997, the Company filed a current report on Form 8-K
dated December 31, 1996, reporting the change in control of the Company as a
result of the issuance of 1,360,000
18
<PAGE>
shares of Common Stock to the Patchouli Foundation ("Patchouli") as payment for
$170,000 the Company owed Patchouli.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ATLANTIC INDUSTRIES, INC.
February 14, 1997 By /s/ Adrian P. Kirby
-------------------------------------
ADRIAN P. KIRBY, Chairman of the
Board, Chief Executive Officer and
President
In accordance with the Securities Exchange Act of 1934, this report has
been signed by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
February 14, 1997 By /s/ Adrian P. Kirby
-------------------------------------
ADRIAN P. KIRBY, Chairman of the
Board, Chief Executive Officer and
President
February 14, 1997 By /s/ Peter N. Chapman
-------------------------------------
PETER N. CHAPMAN, Director,
Treasurer and Secretary
20
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Atlantic Industries, Inc.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report....................................................................................F-2
Financial Statements:
Balance Sheet as of December 31, 1996..................................................................F-3
Statement of Operations and Accumulated Deficit for the period from
January 31, 1996 (inception) to December 31, 1996............................................ F-4
Statement of Stockholders' Deficit for the period from January 31, 1996
(inception) to December 31, 1996............................................................. F-5
Statement of Cash Flows for the period from January 31, 1996 (inception)
to December 31, 1996......................................................................... F-6
Notes to Financial Statements.................................................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Directors and Shareholders
Atlantic Industries, Inc.
We have audited the balance sheet of Atlantic Industries, Inc. as of December
31, 1996, and the related statements of operations, stockholders' deficit and
cash flows for the period from January 31, 1996 (inception) to December 31,
1996. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Atlantic Industries, Inc. as of
December 31, 1996 and the results of its operations and its cash flows for the
period from January 31, 1996 (inception) to December 31, 1996 in conformity with
generally accepted accounting principles.
Moore Stephens, P.C.
New York, New York
February 4, 1997,
except for Note 7,
as to which the date
is February 12, 1997.
F-2
<PAGE>
Atlantic Industries, Inc.
Balance Sheet
December 31, 1996
ASSETS
ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL
ARRANGEMENT (net of valuation allowance) $ 3,320
--------
$ 3,320
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 20,561
Due to shareholder 491
Liabilities of business transferred under contractual arrangement 59,145
--------
Total Current Liabilities 180,197
--------
STOCKHOLDERS' DEFICIT
Preferred stock, $.01 par value; authorized - 10,000,000 shares;
issued and outstanding - 0 shares
Common stock, $.01 par value; authorized - 40,000,000 shares;
192,996 shares issued and outstanding 1,930
Paid-in capital (138,227)
Accumulated deficit (40,580)
--------
Total Stockholders' Deficit (176,877)
--------
$ 3,320
========
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
Atlantic Industries, Inc.
Statement of Operations
For the Period January 31, 1996 (Inception) to December 31, 1996
REVENUE $ -0-
GENERAL AND ADMINISTRATIVE EXPENSES 26,545
--------
LOSS FROM OPERATIONS (26,545)
--------
OTHER INCOME (LOSS)
Loss of transferred business (14,035)
--------
LOSS BEFORE INCOME TAX PROVISION (40,580)
INCOME TAX PROVISION -0-
--------
NET LOSS FOR THE PERIOD $(40,580)
========
LOSS PER SHARE $ (.324)
========
WEIGHTED AVERAGE NUMBER OF SHARES 125,199
========
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
Atlantic Industries, Inc.
Statement of Stockholders' Deficit
For the Period from January 31, 1996 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------ Additional Total
Number of Number of Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Deficit
------ ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
January 31, 1996 Issuance
of Common Stock $ 100 $ 1 $ $ $ 1
Acquired Equity of Little
Prince Productions Ltd. 2,499,923 24,999 (331,297) (306,298)
Common Stock Issued in
Payment of Amount Due
to Shareholder 1,360,000 13,600 156,400 170,000
Recapitalization Adjustment (100) (1) 1 0
Loss for the Period
January 31, 1996 to
December 31, 1996 (40,580) ( 40,580)
February 12, 1997 Reverse
Stock Split: 20 for 1
(See Note 7) (3,666,927) (36,669) (36,669)
----------------------------------------------------------------------------------
Balance December 31, 1996 0 $ 0 192,996 $1,930 $(138,227) $ (40,580) $(176,877)
==================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
Atlantic Industries, Inc.
Statement of Cash Flows
For the Period January 31, 1996 (Inception) to December 31, 1996
OPERATING ACTIVITIES:
Net loss $( 40,580)
Adjustments to reconcile net income to net cash provided by
operating activities:
Loss on transferred business 14,035
Issuance of common shares for related party services
(see Note 3) 10,000
Changes in operating assets and liabilities:
Increase in accounts payable and accrued expenses 16,544
---------
Net Cash Used by Operations ( 1)
---------
FINANCING ACTIVITIES:
Issuance of common shares 1
---------
Net Cash Provided by Financing Activities 1
---------
INCREASE IN CASH -0-
CASH, beginning of period -0-
CASH, end of period $ -0-
==========
SUPPLEMENTAL DISCLOSURES:
- -------------------------
1. During the year, the Company satisfied $160,000 of a payable to a major
shareholder through the issuance of 1,280,000 common shares. The total
payable satisfied was $170,000, which included $10,000 for services
rendered and which is a component of operating activities (see Note 3).
2. A summary of the assets and liabilities of Little Prince Productions,
Ltd. ("Little Prince") that were merged into the Company is as follows:
Miscellaneous receivable $ 8,829
Investments 1
Accounts payable 4,017
Due to shareholder 160,491
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
The $8,829 receivable is from LPPL Corp. ("LPPL"), Little Prince's
former subsidiary (see Note 5). This amount has been eliminated against
LPPL's payable on the balance sheet.
The accompanying notes are an integral part of these financial statements
I. ORGANIZATION AND STOCK ACQUISITION
Atlantic Industries, Inc. (the "Company") was incorporated under the
laws of Colorado on January 31, 1996 for the purpose of having merged
into it a public company, Little Prince Productions, Ltd ("Little
Prince"), and to continue the real estate activities of Little Prince.
Little Prince was organized in New York on April 3, 1980 for the
purpose of exploiting certain ancillary and subsidiary rights to the
literary work entitled "The Little Prince" by Antoine de Saint-Exupery
and to engage in various other aspects of the theatrical production
business. On November 16, 1992, Little Prince acquired 100% of the
issued common shares of Tyne River Properties plc ("Tyne River"), a
company organized in the United Kingdom, in exchange for 11,899,236
(approximately 85%) of the outstanding common shares of Little Prince.
Due to the relative size of the companies, Tyne River was deemed the
purchaser. For accounting purposes, the acquisition was treated as a
recapitalization of Tyne River, with Tyne River as the acquirer (a
reverse acquisition). As part of this reverse acquisition, Little
Prince's theatrical operations, assets and liabilities were transferred
and assigned to its wholly-owned subsidiary, LPPL Corp ("LPPL"), with
the intention that LPPL would continue the theatrical activities.
After the Tyne River acquisition, Little Prince planned to conduct its
business operations in three segments. The principal segment was to be
Tyne River's proposed real estate acquisition and investment
activities, with the theatrical operations constituting a smaller area.
The third segment comprised certain real estate development projects
and operations owned by Tyne River at the date of acquisition. These
operations were intended to be phased out as soon as practicable after
the acquisition through the completion and/or disposition of all such
projects.
Little Prince conducted its business in these three segments, however,
towards the end of 1993 Tyne River experienced severe cash flow
problems which resulted in Tyne River's insolvency by early 1994. Tyne
River's condition continued to worsen until Little Prince sold all of
its Tyne River shares on March 29, 1994. Following this stock sale,
Little Prince continued, although at a minimal level, the theatrical
production operations through its subsidiary, LPPL. In an effort to
restore the profitability of Little Prince, its board of directors
adopted a plan of reorganization which, among other things, called for
the merger of Little Prince into the Company. This plan was ratified by
a special meeting of Little Prince's Shareholders on February 29, 1996.
On December 6, 1996, the Company issued 2,499,936 common shares for all
the 24,999,236 outstanding common shares of Little Prince. The shares
of Little Prince were then cancelled and the separate corporate
existence of this company ceased, with the Company surviving to all of
Little Prince's assets and liabilities. For accounting purposes, the
acquisition is treated as a recapitalization of the Company, with the
F-7
<PAGE>
Atlantic Industries, Inc.
Notes to Financial Statements
(continued)
Company as the acquirer. The 2,499,923 shares issued are treated as issued for
cash and are shown outstanding for all periods presented in the same manner as
for a stock split. The financial statements of the Company reflect its financial
position as of December 31, 1996 and its results of operations for the period
from January 31, 1996 (inception) to December 31, 1996. Because it is the
acquiree for accounting purposes, the results of operations for Little Prince
are not included for the period from January 1, 1996 to December 6, 1996, the
date of merger. The balance sheet of Little Prince as of December 6, 1996 is
merged into the Company's balance sheet at that date. Pro forma financial
information for the merger transaction is not presented as, at the date of the
transaction, Little Prince was considered a public shell and accordingly, the
transaction will not be considered a business combination.
The Company's business plan encompasses its real estate acquisition and
investment activities and an expansion into the potential acquisition of service
or manufacturing businesses. The Company intends to look for these investments
throughout the world. The Company has also decided to discontinue its theatrical
productions operations through the disposition of LPPL (see Note 5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of
contingent assets and liabilities at December 31, 1996, and
reported amounts of revenues and expenses during the fiscal
year. Actual results could differ from those estimates.
b. Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less when purchased to be cash
equivalents.
c. Foreign Currency Translation
Balance sheet amounts denominated in foreign currencies are
translated into U.S. dollars using the year end rate of
exchange, Revenues, income, expenses and losses denominated in
foreign currencies are translated at the average exchange rate
for the year.
F-8
<PAGE>
Atlantic Industries, Inc.
Notes to Financial Statements
(continued)
d. Earnings per Share
Income per common share is computed on the basis of the
weighted average shares of common stock outstanding. At
December 31, 1996 this average was 125,199 (see Note 7).
e. Assets and Liabilities of Transferred Business
The Company reports the disposition of LPPL in accordance with
the SEC's SAB Topic 5E, which requires the Company not to
recognize the gain on the disposition and to continue to carry
the assets and liabilities of LPPL on its balance sheet until
it can be reasonably determined that the risks of LPPL's
business have been transferred to the purchaser of the LPPL
shares. These assets and liabilities are segregated on the
balance sheet. Operating losses but not operating income of
the divested business are included in the Company's results of
operations (see Note 5).
3. RELATED PARTY TRANSACTIONS
A major shareholder of the Company has advanced funds to the Company
and Little Prince in order to allow the Company and Little Prince to
meet their obligations to creditors. The total advance aggregated
$170,491 on December 31, 1996 when the Company issued 1,360,000 common
shares to the shareholder in satisfaction of $170,000 of the payable.
The attorney-in-fact for this shareholder, which is a foundation, is
also a director and officer of the Company.
Included in the $170,491 advance was $10,000 of administrative services
provided to the Company. The issuance of 80,000 for these services was
based on the fair value of the services received. The charge to the
Company is included in general and administrative expenses.
4. INCOME TAXES
Income taxes have not been provided due to the Company's operating
loss. At December 31, 1996 the Company has a gross deferred tax asset
of approximately $662,000, which arises principally from net operating
losses. These losses include those of Little Prince to which it
succeeded in the merger. A valuation allowance of $662,000 has been
recorded, which reduces the asset to $0. An allowance of this amount
has been reserved due to the uncertainty of the Company utilizing the
losses in the future.
F-9
<PAGE>
Atlantic Industries, Inc.
Notes to Financial Statements
(continued)
The net operating losses, which total approximately $1,949,000, can be
used to reduce future federal taxable income, expire as follows:
Year Ending December 31, Loss
------------------------ ----
2008 $1,742,000
2009 73,000
2010 74,000
2011 60,000
Included in the net operating losses of $1,949,000 is approximately
1,889,000 carried forward from Little Prince under Internal Revenue
Code Section 381 and related regulations.
5. ASSETS AND LIABILITIES OF BUSINESS TRANSFERRED UNDER CONTRACTUAL
ARRANGEMENT
On July 22, 1996, Little Prince sold all of the shares in its 100%
owned subsidiary, LPPL. Under the terms of the sales agreement, these
shares could revert to the shareholders of Little Prince under certain
circumstances. Due to this clause in the agreement, Little Prince is
deemed not to have transferred the risks of LPPL's business to the
purchaser. In accordance with the SEC's SAB Topic 5E, Little Prince
continued to carry the assets and liabilities of LPPL on its balance
sheet, and these assets and liabilities were merged into the Company's
balance sheet on December 6, 1996, along with the rest of Little
Prince's assets and liabilities. Little Prince's gain on the
disposition of $150,630 is deferred and will be recognized upon the
completion of the disposition which, according to the sales agreement,
is expected to occur in July 1997. The Company also charges to
operations losses incurred by Little Prince subsequent to the sale of
the shares. For the period ended December 31, 1996, $14,035 was charged
to operations. At December 31, 1996, the following assets and
liabilities of LPPL are carried on the Company's balance sheet:
F-10
<PAGE>
Atlantic Industries, Inc.
Notes to Financial Statements
(continued)
Cash and cash equivalents $ 208
Prepaid expenses 612
Production rights, net of amortization 2,500
---------
Total Assets $ 3,320
=========
Accounts payable $ 159,145
---------
Total Liabilities $ 159,145
=========
6. AUTHORITATIVE PRONOUNCEMENTS
In September 1996, the FASB released SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." The statement prescribes accounting and reporting
standards for transfers and servicing of financial assets and
extinguishments of liabilities and is effective for transfers and
servicing financial assets and extinguishments of liabilities after
December 31, 1996. Due to the Company's minimal investment in financial
assets, the adoption of SFAS No. 125 is not expected to have a material
impact on its financial statements.
7. SUBSEQUENT EVENTS
On February 12, 1997, at a special meeting of the shareholders, a
resolution was passed to effect a twenty-for-one reverse stock split as
of February 13, 1997. The effect of this split is to reduce the issued
and outstanding shares to approximately 192,996, and this change is
reflected in these financial statements.
F-11
<PAGE>
EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk (*), are
filed herewith. The exhibits not so designated have been filed previously and
are incorporated herein by reference to the documents indicated in brackets
following the descriptions of such exhibits. For electronic filing purposes
only, this report contains Exhibit 27, Financial Data Schedule.
Exhibit No. Description
- ----------- -----------
2.1(1) Agreement and Plan of Merger dated February 9, 1996, between
the Company and Atlantic Industries, Inc.
2.2* Certificate of Merger of Little Prince Productions, Ltd., a
New York corporation into Atlantic Industries, Inc., a
Colorado corporation, dated March 29, 1996, under Section 907
of the New York Business Corporation Law.
2.3* Articles of Merger of Little Prince Productions, Ltd., a New
York corporation into Atlantic Industries, Inc., under Section
7-111-107 of the Colorado Business Corporation Act.
3.1* Articles of Incorporation of Atlantic Industries, Inc., as
amended
3.2* Amended and Restated Bylaws of Atlantic Industries, Inc.
4.1 A description of the rights of the Company's shareholders is
contained in the Articles of Incorporation, as amended, filed
as Exhibit 3.1 and is incorporated herein by reference.
27* Financial Data Schedule
- ---------------
*Filed herewith.
(1) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Form 10-K, dated December 31, 1995, which exhibit is incorporated
herein by reference.
EXHIBIT 2.2
-----------
CERTIFICATE OF MERGER
OF
LITTLE PRINCE PRODUCTIONS, LTD., A NEW YORK CORPORATION
INTO
ATLANTIC INDUSTRIES, INC, A COLORADO CORPORATION
UNDER SECTION 907 OF THE BUSINESS CORPORATION LAW
We, the undersigned, Adrian P. Kirby and Peter N. Chapman, being
respectively the President, Chief Executive Officer and Chairman of the Board,
and the Secretary of Little Prince Productions, Ltd., and Adrian P. Kirby and
Peter N. Chapman, being respectively the President, Chief Executive Officer and
Chairman of the Board, and the Secretary of Atlantic Industries, Inc. hereby
certify:
1. (a) The name of each constituent corporation is as
follows:
Little Prince Productions, Ltd., a New York corporation.
(b) The name of the surviving corporation is:
Atlantic Industries, Inc., a Colorado corporation.
2. As to each constituent corporation, the designation and
number of outstanding shares of each class and series and the voting rights
thereof are as follows:
Designation and
Number of Shares Class or Series Shares Entitled to
Name of in Each Class or of Shares Vote as
Corporation Series Outstanding Entitled to Vote a Class or Series
----------- ------------------ ---------------- -----------------
Little Prince 24,999,236 shares, Common Stock 24,999,236
Productions, Ltd. $.01 par value per
share
Atlantic Industries, 100 shares, $.01 par Common Stock 100
Inc. value per share
3. The merger was adopted by Little Prince Productions, Ltd. by
the affirmative vote of at least two thirds of the issued and outstanding shares
entitled to vote thereon.
<PAGE>
4. The merger is permitted by the laws of the jurisdiction of
each constituent foreign corporation and is in compliance therewith. Each
constituent foreign corporation has complied as follows:
Atlantic Industries, Inc. has complied with the applicable provisions
of the laws of the State of Colorado under which it is incorporated, and this
merger is permitted by such laws.
5. The surviving co rporation is Atlantic Industries, Inc., a
corporation of the State of Colorado, incorporated on the 31st day of January,
1996, and which is currently not authorized to conduct business in New York and
will not conduct any business in New York until an application for authority
shall have been filed with the New York Department of State.
6. The date when the Certificate of Incorporation of Little
Prince Productions, Ltd. was filed by the Department of State was the 3rd day of
April, 1980.
7. Atlantic Industries, Inc. agrees that it may be served with
process in the State of New York in any action or special proceeding for the
enforcement of any liability or obligation of any constituent corporation,
previously amenable to suit in the State of New York, and for the enforcement
under the Business Corporation Law, of the right of shareholders of any
constituent domestic corporation to receive payment for their shares against the
surviving corporation; and it designates the Secretary of State of New York as
its agent upon whom process may be served in the manner set forth in paragraph
(b) of section 306 of the Business Corporation Law, in any action or special
proceeding. The post office address to which the Secretary of State shall mail a
copy of any process against it served upon him is c/o CT Corporation System,
1633 Broadway, New York, NY 10019.
Such post office address shall supersede any prior address designated
as the address to which process shall be mailed.
8. Atlantic Industries, Inc. agrees that, subject to the
provision of Section 623 of the Business Corporation Law, it will promptly pay
to the shareholders of each constituent New York corporation the amount, if any,
to which they shall be entitled under the provisions of the Business Corporation
Law, relating to the right of shareholders to receive payment for their shares.
9. The merger shall be effective upon the filing of this
Certificate of Merger.
2
<PAGE>
IN WITNESS WHEREOF, we have signed this certificate on the 29th day of
March, 1996 and we affirm the statements contained therein as true under
penalties of perjury.
LITTLE PRINCE PRODUCTIONS, LTD.
/s/ Adrian P. Kirby
----------------------------------------
By: Adrian P. Kirby
Its: President, Chief Executive Officer
and Chairman of the Board
/s/ Peter N. Chapman
----------------------------------------
By: Peter N. Chapman
Its: Secretary
ATLANTIC INDUSTRIES, INC.
/s/ Adrian P. Kirby
----------------------------------------
By: Adrian P. Kirby
Its: President, Chief Executive Officer
and Chairman of the Board
/s/ Peter N. Chapman
----------------------------------------
By: Peter N. Chapman
Its: Secretary
3
EXHIBIT 2.3
-----------
ARTICLES OF MERGER
OF
LITTLE PRINCE PRODUCTIONS, LTD., A NEW YORK CORPORATION
INTO
ATLANTIC INDUSTRIES, INC, A COLORADO CORPORATION
UNDER SECTION 7-111-107 OF THE COLORADO BUSINESS CORPORATION ACT
We, the undersigned, Adrian P. Kirby and Peter N. Chapman, being
respectively the President, Chief Executive Officer and Chairman of the Board,
and the Secretary of Atlantic Industries, Inc., and Adrian P. Kirby and Peter N.
Chapman, being respectively the President, Chief Executive Officer and Chairman
of the Board, and the Secretary of Little Prince Productions, Ltd. hereby
certify:
1. (a) The name of the non-surviving corporation is as
follows:
Little Prince Productions, Ltd., a New York corporation
("Little Prince").
(b) The name of the surviving corporation is:
Atlantic Industries, Inc., a Colorado corporation
("Atlantic").
2. The Agreement and Plan of Merger entered into by and among
Atlantic and Little Prince is attached hereto as Exhibit A and incorporated
herein by reference.
3. The merger was adopted by Atlantic by the affirmative vote of
a majority of the outstanding shares entitled to vote thereon and by Little
Prince by the affirmative vote of at least two thirds of the issued and
outstanding shares entitled to vote thereon.
4. Little Prince has complied with the applicable provisions of
the laws of the State of New York under which it is incorporated, and this
merger is permitted by such laws.
5. The surviving corporation is Atlantic Industries, Inc., a
corporation of the State of Colorado, incorporated on the 31st day of January,
1996.
6. The merger shall be effective on the date of filing of this
Articles of Merger.
<PAGE>
IN WITNESS WHEREOF, we have signed this certificate on the 29th day of
March, 1996 and we affirm the statements contained therein as true under
penalties of perjury.
ATLANTIC INDUSTRIES, INC.
/s/ Adrian P. Kirby
----------------------------------------
By: Adrian P. Kirby
Its: President, Chief Executive Officer
and Chairman of the Board
/s/ Peter N. Chapman
----------------------------------------
By: Peter N. Chapman
Its: Secretary
LITTLE PRINCE PRODUCTIONS, LTD.
/s/ Adrian P. Kirby
----------------------------------------
By: Adrian P. Kirby
Its: President, Chief Executive Officer
and Chairman of the Board
/s/ Peter N. Chapman
----------------------------------------
By: Peter N. Chapman
Its: Secretary
2
EXHIBIT 3.1
-----------
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.
<PAGE>
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 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;
2
<PAGE>
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 stock standing 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, a majority of the
shares entitled to vote at such meeting, 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.
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
3
<PAGE>
Director Address
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 The Corporation Company.
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.
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
4
<PAGE>
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
5
<PAGE>
STATE OF COLORADO ]
] ss.
CITY AND ]
COUNTY OF DENVER ]
I, the undersigned, a Notary Public, hereby certify that on the 31st
day of January, 1996, personally appeared before me, Brian D. Lewandowski, who
being by me first duly sworn, declared that he is the person who signed the
foregoing document as incorporator, and that the statements therein contained
are true.
WITNESS my hand and official seal.
/s/ Cynthia G. Lewis
----------------------------------------
Notary Public
My Commission Expires:
June 17, 1996
- ------------------------
6
<PAGE>
CONSENT OF REGISTERED AGENT
The undersigned, CT Corporation System, hereby voluntarily consent to
serve as registered agent for Atlantic Industries, Inc., a Colorado corporation,
until removed or resignation is submitted in accordance with the Colorado
Business Corporation Act.
/s/ Marcia J. Bunshara
----------------------------------------
CT Corporation System, Registered Agent
7
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ATLANTIC INDUSTRIES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned Atlantic Industries, Inc., a Colorado corporation (the
"Corporation"), hereby adopts these Articles of Amendment (the "Articles").
These Articles amend the provisions of the Articles of Incorporation of the
Corporation, originally filed with the Secretary of State of the State of
Colorado on January 31, 1996.
These Articles have been duly adopted, as required by law, at a meeting
of the Board of Directors of the Corporation held on December 31, 1996. In
addition, these Articles have been duly adopted by the shareholders of the
Corporation at a meeting held on February 12, 1997. The number of shares voted
for the amendment was sufficient for approval.
ARTICLE I
NAME
The name of the Corporation is Atlantic Industries, Inc.
ARTICLE II
AMENDMENT
Article IV, Section 1 of the Articles of Incorporation of the
Corporation is hereby amended in its entirety to read as follows:
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. Upon amendment to this Article to read as herein set forth, each
twenty (20) shares of outstanding common stock is converted into and
reconstituted as one (1) share of common stock.
ARTICLE III
CHANGE IN ISSUED SHARES
The manner in which any exchange, reclassification or cancellation of
issued shares provided for in the amendment shall be effected, is as follows:
<PAGE>
Upon amendment to Article IV, Section 1 to read as herein set forth,
each twenty (20) shares of outstanding common stock is converted into and
reconstituted as one (1) share of common stock.
IN WITNESS WHEREOF, the undersigned has executed these Articles as of
the 13th day of February, 1997.
ATLANTIC INDUSTRIES, INC.
By /s/ Adrian P. Kirby
----------------------------------------
Adrian P. Kirby, President
2
EXHIBIT 3.2
AMENDED AND RESTATED 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
<PAGE>
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 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
2
<PAGE>
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 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.
3
<PAGE>
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.
4
<PAGE>
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 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 or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service organization,
or other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the Corporation. The transmitted appointment shall set
forth or be transmitted with written evidence from which 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.
Revocation of a proxy does not affect the right of the Corporation to
accept the proxy's authority unless (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
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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 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
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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:
(a) the shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity;
(b) 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;
(c) 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;
(d) 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;
(e) 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
(f) 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.
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.
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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 2 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.
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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 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.
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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.
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
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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.
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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.
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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 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
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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
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
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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
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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.
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
16
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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.
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
17
<PAGE>
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.
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
18
<PAGE>
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.
19
<PAGE>
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.
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 Amended and Restated Bylaws
are the Amended and Restated Bylaws of
the Corporation that were duly adopted
by the Board of Directors of the
Corporation on December 19, 1996
/s/ Peter N. Chapman
----------------------------------------
Peter N. Chapman, Secretary
20
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