UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 0-11730
SILVERTHORNE PRODUCTION COMPANY
(Exact name of small business issuer as specified in its charter)
Colorado 84-0189377
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7001 Seaview Avenue NW
Suite 210
Seattle, Washington 98117
(Address of principal executive offices)
(206) 297-6151
(Issuer's Telephone number)
N/A
----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Outstanding at
Class December 31, 1999
- ----------------------------------- -----------------
Common Stock, $.001 par value 32,500,000
Transitional Small Business Disclosure Format (Check one): Yes_____ No X
<PAGE>
SILVERTHORNE PRODUCTION COMPANY
Commission File Number: 0-11730
Quarter Ended December 31, 1999
FORM 10-QSB
Part I - FINANCIAL INFORMATION
Unaudited Consolidated Statements of Operations..................Page 1
Unaudited Consolidated Balance Sheets............................Page 3
Unaudited Consolidated Statements of Cash Flows..................Page 4
Notes to Unaudited Consolidated Financial Statements.............Page 5
Management's Discussion and Analysis or Plan of Operation........Page 8
Part II - OTHER INFORMATION.....................................Page 13
Signatures......................................................Page 15
<PAGE>
SILVERTHORNE PRODUCTION COMPANY
Unaudited Consolidated Statements of Operations
Three Months Ended
December 31,
------------------------------
1998 1999
------------ ------------
Revenue
Prepaid cards and pins ................ $ -- $ 318,705
Commissions ........................... -- 490,074
Other ................................. -- 2,370
Allowances ............................ -- (12,402)
------------ ------------
Total revenue ........................ -- 798,747
------------ ------------
Operating expenses
Prepaid cards and pins ................ -- 236,954
Commissions ........................... -- 396,570
Sales, general and administrative ..... -- 561,108
------------ ------------
Total operating expenses ............. -- 1,194,632
------------ ------------
Loss from operations .................... -- (395,885)
Other income (expense)
Other income .......................... -- 16,727
Interest expense ...................... (16,953) (32,700)
------------ ------------
Loss before income taxes ................ (16,953) (411,858)
Income taxes ............................ 4,132 --
------------ ------------
Net loss ................................ $ (12,821) $ (411,858)
============ ============
Loss per common share - basic and diluted $ -- $ (.01)
============ ============
Weighted average number of common shares
outstanding - basic and diluted ........ 2,000 32,500,000
============ ============
See notes to unaudited consolidated financial statements.
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<PAGE>
SILVERTHORNE PRODUCTION COMPANY
Unaudited Consolidated Statements of Operations
Six Months Ended
December 31,
------------------------------
1998 1999
------------ ------------
Revenue
Prepaid cards and pins .................. $ -- $ 763,795
Commissions ............................. -- 935,207
Other ................................... -- 2,370
Allowances .............................. -- (17,781)
------------ ------------
Total revenue .......................... -- 1,683,591
------------ ------------
Operating expenses
Prepaid cards and pins .................. -- 539,591
Commissions ............................. -- 741,613
Stock options granted for services to non -- 5,836,724
employees
Sales, general and administrative ....... -- 1,063,656
------------ ------------
Total operating expenses ............... -- 8,181,584
------------ ------------
Loss from operations ...................... -- (6,497,993)
Other income (expense)
Other income ............................ -- 16,727
16,727
Interest expense ........................ (33,906) (68,250)
------------ ------------
Loss before income taxes .................. (33,906) (6,549,516)
Income taxes .............................. 8,264 --
------------ ------------
Net loss .................................. $ (25,642) $ (6,549,516)
============ ============
Loss per common share - basic and diluted . $ -- $ (.23)
============ ============
Weighted average number of common shares
outstanding - basic and diluted .......... 2,000 28,314,262
============ ============
See notes to unaudited consolidated financial statements.
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<PAGE>
SILVERTHORNE PRODUCTION COMPANY
Unaudited Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
------------ ------------
Assets
<S> <C> <C>
Current assets
Cash ........................................................ $ -- $ 2,765,570
Accounts receivable ......................................... -- 539,316
Inventory ................................................... -- 35,665
Other current assets ........................................ -- 153,348
------------ ------------
Total current assets ....................................... -- 3,493,899
------------ ------------
Property and equipment ........................................ -- 225,500
------------ ------------
Other assets
Intangibles and other assets ................................ 1,316,551 1,535,627
------------ ------------
Total other assets ......................................... 1,316,551 1,535,627
------------ ------------
Total assets .................................................. $ 1,316,551 $ 5,255,026
============ ============
Liabilities and Stockholders' (Deficit) Equity
Current liabilities
Interest payable ............................................ $ 67,814 $ 136,064
Current portion of long-term debt ........................... 700,000 395,000
Accounts payable ............................................ -- 94,095
Deferred revenue ............................................ -- 95,486
Commissions payable ......................................... -- 242,968
Payroll taxes payable ....................................... -- 76,657
Income taxes payable ........................................ -- 13,770
------------ ------------
Total current liabilities .................................. 767,814 1,054,040
Long-term debt ................................................ 600,000 --
------------ ------------
Total liabilities .......................................... 1,367,814 1,054,040
Stockholders' (deficit) equity Common stock,
$.01 (June) and $.001 (December) par value,
10,000 shares authorized; 2,000 shares issued
and outstanding at June 30, 1999 and 50,000,000
shares authorized; 32,500,000 issued and
outstanding and 49,808,966 to be issued at
December 31, 1999 ............................................ 20 82,308
Additional paid in capital .................................. -- 10,909,477
Accumulated deficit ......................................... (51,283) (6,790,799)
------------ ------------
Total stockholders' (deficit) equity ....................... (51,263) 4,200,986
------------ ------------
Total liabilities and stockholders' (deficit)
equity ....................................................... $ 1,316,551 $ 5,255,026
============ ============
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
SILVERTHORNE PRODUCTION COMPANY
Unaudited Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------------
1998 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss .................................... $ (25,642) $(6,549,516)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization .............. -- 17,563
Stock options granted for services to non
employees ................................. -- 5,836,724
Changes in assets and liabilities
Receivables ............................... -- (259,809)
Inventory ................................. -- (10,589)
Other current assets ...................... -- (152,596)
Intangible assets ......................... (8,264) (9,076)
Interest payable .......................... 33,906 68,250
Accounts payable .......................... -- 90,837
Deferred revenue .......................... -- 23,723
Commissions payable ....................... -- 58,700
Payroll taxes payable ..................... -- 26,254
----------- -----------
25,642 5,689,981
Net cash used in operations ............. -- (859,535)
----------- -----------
Cash flows from investing activities
Capital expenditures ........................ -- (158,363)
Cash acquired in acquisition ................ -- 21,248
----------- -----------
Net cash used in investing activities ... -- (137,115)
----------- -----------
Cash flows from financing activities
Payment for stock ........................... -- (190,000)
Proceeds from subscriptions received ........ -- 5,157,220
Payments on notes payable ................... -- (1,205,000)
----------- -----------
Net cash provided by financing activities -- 3,762,220
----------- -----------
Net increase in cash .......................... -- 2,765,570
Cash and cash equivalents-beginning of period . -- --
----------- -----------
Cash and cash equivalent-end of period ........ $ -- $ 2,765,570
=========== ===========
</TABLE>
Non-cash investing and financing activities:
There were certain non-cash transactions associated with the acquisition of
Cognigen Corporation and the reverse acquisition of Silverthorne Production
Company by Inter-American Telecommunications Holdings Corporation (ITHC).
See notes to unaudited consolidated financial statements.
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<PAGE>
SILVERTHORNE PRODUCTION COMPANY
Notes to Unaudited Consolidated Financial Statements
1) In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, have been made to (a) the results of consolidated
operations for the three and six month periods ended December 31, 1999 and
1998, respectively, (b) the consolidated balance sheet at December 31, 1999
and 1998 and (c) the consolidated statements of cash flows for the six month
periods ended December 31, 1999 and 1998, respectively, in order to make the
financial statements not misleading.
2) The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for financial statements. For further information, refer to the
audited consolidated financial statements and notes thereto for the year
ended June 30, 1999, included in Silverthorne Production Company's
("Company") Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission and the audited financial statements of Inter-American
Telecommunications Holding Corporation (ITHC) and Cognigen Corporation
(Cognigen) for the year ended June 30, 1999 included in the Company's Form
8-K/A filed with the Securities and Exchange Commission on March 8, 2000.
3) These unaudited consolidated financial statements include the accounts of
Inter-American Telecommunications Corporation, ITHC, Cognigen and the
Company. All significant intercompany balances and transactions have been
eliminated in consolidation.
4) The Company was incorporated in May 1983 in the State of Colorado to engage
in the cellular radio and communications business and to engage in any other
lawful activity permitted under Colorado law. In June 1988, the Company
changed its name to Silverthorne Production Company and commenced operations
in the oil and gas industry. These operations were discontinued in 1989.
Since 1989, the Company has attempted to locate acquisition prospects and
negotiate an acquisition. The Company's pursuit of an acquisition did not
materialize until August 20, 1999.
5) On August 20, 1999, the Company completed the acquisition of all of the net
assets of ITHC in exchange for up to 49,041,397 shares of the Company's
common stock. For financial statement purposes, this business combination was
accounted for as an additional capitalization of ITHC (a reverse acquisition
in which ITHC was the accounting acquirer). ITHC is considered the surviving
entity and the historical financial statements prior to the acquisition are
those of ITHC. The Company's net book value prior to the transaction was $0.
The issuance of the stock must be completed in two closings due to the
limited amount of authorized stock available for issuance under its articles
of incorporation. The first closing resulted in the issuance of 11,742,953
shares while the remaining 37,298,444 shares will be issued after a
shareholder vote to increase the authorized number of shares or after a
reverse stock split is effected. The Company issued 5,000,000 shares of the
Company's common stock as finders' fees in connection with the transaction.
- 5 -
<PAGE>
SILVERTHORNE PRODUCTION COMPANY
Notes to Unaudited Consolidated Financial Statements
The Company will be the legal survivor and plans to change its name to
Cognigen Networks, Inc.
Additionally, ITHC purchased 12,602,431 shares of the Company's common stock
for a price of $190,000 from certain existing shareholders of the Company.
This was recorded as a charge to equity in the amount of $190,000.
6) Company officers from time to time obtained funds from shareholders to pay
for expenses and to pursue Company business opportunities.
7) During the three months ended December 31, 1999, the Company advanced
$435,000 to a company it had entered into a letter-of-intent to acquire. The
letter-of-intent expired on February 29, 2000.
8) On July 1, 1999, ITHC entered into an agreement with Cognigen Corporation
(Cognigen) to purchase all of Cognigen's net assets. The purchase price
included 5,500 shares of ITHC common stock ($.01 par value), a $300,000 note
payable due October 1, 1999, a four year employment contract for the founder
of Cognigen with an annual base salary of $175,000, and a commitment to
provide future working capital of $600,000 over a three year period to cover
business expansion. The transaction was accounted for as a purchase. ITHC
acquired net assets of $86,230 and recorded goodwill of $213,770. The
goodwill will be amortized over a life of 20 years.
ITHC had various working capital funding commitments in the amount of
$850,000 with related parties entered into in connection with acquisitions of
various customer lists.
9) During the six months ended December 31, 1999, the Company received
subscriptions for 12,510,522 shares of the Company's common stock at prices
of $0.38 per share (11,583,722 shares) and $1.60 per share (926,800 shares)
from various persons. The subscriptions and cash were received prior to
December 31, 1999, however, the stock was not issued until after December 31,
1999. The Company agreed to pay a fee of 12% of the total proceeds
received from the sale of the common stock to a distributor and issue
warrants to purchase up to a maximum of 1,500,000 shares of the Company's
common stock to various persons in connection with the sales. As of December
31, 1999, the Company had paid $727,474 towards the total fee due and other
expenses associated with the offering.
- 6 -
<PAGE>
SILVERTHORNE PRODUCTION COMPANY
Notes to Unaudited Consolidated Financial Statements
10) In August 1999, the Company issued 31,600,000 options entitling the holders
to purchase the Company's common stock at $0.46 per share. The options vest
immediately and expire five years from the date issued. The options cannot
be exercised until the Company amends it articles of incorporation or
effects a reverse split of its common stock so that it has sufficient shares
available for issuance upon the exercise of these options. 25,200,000 of
these options were issued to non employees while the remaining options were
issued to employees and directors. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized for the stock options issued to
employees and directors. $5,836,724 of compensation expense was recorded in
connection with the options granted to non employees.
- 7 -
<PAGE>
SILVERTHORNE PRODUCTION COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
Certain of the information discussed in this quarterly report, and in particular
in this section entitled "Management's Discussion and Analysis or Plan of
Operation," contains forward-looking statements that involve risks and
uncertainties that might adversely affect the operating results of Silverthorne
Production Company ("Company") in the future in a material way. Such risks and
uncertainties include, without limitation, rate changes, fee policy or
application changes and competition. Many of these risks are beyond the control
of the Company.
Overview
Inter-American Telecommunications Holding Corporation (ITHC) was incorporated on
July 24, 1998 in Delaware. Since its inception, ITHC has directed its efforts
toward the acquisition of assets that would allow it to be engaged in direct and
multilevel agency marketing and sale of long distance service and products as
well as the switching and transport of voice, fax and data telephone and
internet traffic and related services. On July 1, 1999, ITHC acquired the net
assets of Cognigen Corporation (Cognigen) in exchange for 5,500 shares of its
common stock and a note payable of $300,000. Cognigen was actively marketing
long distance telephone services over the internet.
The Company was incorporated on May 6, 1983, in Colorado. On August 20, 1999,
the Company completed the acquisition of all of the net assets of ITHC in
exchange for up to 49,041,397 shares of the Company's common stock. For
financial statement purposes, this business combination was accounted for as an
additional capitalization of ITHC (a reverse acquisition in which ITHC was the
accounting acquirer). For accounting purposes, ITHC is considered the surviving
entity and the historical financial statements prior to the acquisition are
those of ITHC. The Company's net book value prior to the transaction was $0.
- 8 -
<PAGE>
SILVERTHORNE PRODUCTION COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
ITHC was a developmental stage company since its inception on July 24, 1998
through June 30, 1999. During this stage, ITHC generated no revenues and
incurred only minimal operational costs. ITHC focused its efforts on the pursuit
of the acquisition of business opportunities. On July 1, 1999, ITHC completed
the acquisition of all the net assets of Cognigen in a transaction accounted for
as a purchase. Additionally, in a transaction accounted for as a reverse
acquisition, ITHC acquired control of the Company, a non-operating public shell
corporation. Therefore, the results of operations for the three and six months
ended December 31, 1999 are comprised entirely of the operations generated from
the net assets purchased from Cognigen on July 1, 1999. As no operations existed
for ITHC for the three and six month periods ended December 31, 1998, no
meaningful comparisons can be made.
For purposes of this Management's Discussion and Analysis or Plan of Operation,
the Company believes that the unaudited results of operations for Cognigen for
the three and six months ended December 31, 1998 shown below provide a more
meaningful basis for analysis. Therefore, all comparisons and analysis included
in this Management's Discussion and Analysis or Plan of Operation will be based
upon these unaudited results of operations for Cognigen for the three and six
months ended December 31, 1998.
Unaudited Results of Operations for Cognigen
Three Six
Months Ended Months Ended
December 31, December 31,
1998 1998
--------- ---------
Revenue
Prepaid cards and pins .................... $ 207,625 $ 430,387
Commissions ............................... 82,751 157,111
--------- ---------
Total revenue .......................... 290,376 587,498
Operating expenses
Prepaid cards and pins .................... 132,225 256,124
Commissions ............................... 52,434 116,033
Sales, general and administrative ......... 75,812 220,789
--------- ---------
Total operating expenses ............... 260,471 592,946
--------- ---------
Income (loss) from operations and before taxes 29,905 (5,448)
Income taxes ................................. -- --
--------- ---------
Net income (loss) ............................ $ 29,905 $ (5,448)
========= =========
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<PAGE>
SILVERTHORNE PRODUCTION COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Three Months Ended December 31, 1999 Compared to Three Months Ended December 31,
1998
Total revenue for the three months ended December 31, 1999 was $798,747 compared
to $290,376 for the three months ended December 31, 1998. Total revenue for the
1999 period consisted of $318,705 related to prepaid cards and pins and $490,074
related to commissions. Total revenue for the comparable period in 1998
consisted of $207,625 related to prepaid cards and pins and $82,751 related to
commissions. The $111,080, or 54%, increase in prepaid cards and pins is due to
a larger internet presence and more agents making sales. The $407,323, or 492%,
increase in commissions is due to a larger number of agents making sales.
Operating costs related to prepaid cards and pins for the three months ended
December 31, 1999 increased $104,729, or 79%, to $236,954 from $132,225 during
the three months ended December 31, 1998. Operating costs related to commissions
for the three months ended December 31, 1999 increased $344,136, or 656%, to
$396,570 from $52,434 during the three months ended December 31, 1998. The cost
increases are directly related to the increased revenue.
General and administrative operating expenses increased $485,296, or 640%, to
$561,108 during the three months ended December 31, 1999 from $75,812 during the
three months ended December 31, 1998. This increase is primarily due to the
addition of staff and associated costs.
The Company incurred a loss from operations of $395,885 for the three months
ended December 31, 1999 compared with operating income of $29,905 for the three
months ended December 31, 1998. The primary decrease in operating income during
the current period is mostly related to the increased staff costs.
Net interest expense for the three months ended December 31, 1999 of $32,700
compares to net interest expense during the same three months ended December 31,
1998 of $0. The reason for this increase is due to increased borrowings during
the three months ended December 31, 1999. After interest expense, the net loss
for the three months ended December 31, 1999 was $411,858, or $(.01) per share,
compared to net income of $29,905 for the three months ended December 31, 1998.
Six Months Ended December 31, 1999 Compared to Six Months Ended December 31,
1998
Total revenue for the six months ended December 31, 1999 was $1,683,591 compared
to $587,498 for the six months ended December 31, 1998. Total revenue for the
1999 period consisted of $763,795 related to prepaid cards and pins and $935,207
related to commissions. Total revenue for the comparable period in 1998
consisted of $430,387 related to prepaid cards and pins and $157,111 related to
commissions. The $333,408, or 77%, increase in prepaid cards and pins is due to
a larger internet presence and more agents making sales. The $778,096, or 495%,
increase in commissions is due to a larger number of agents making sales.
- 10 -
<PAGE>
SILVERTHORNE PRODUCTION COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Operating costs related to prepaid cards and pins for the six months ended
December 31, 1999 increased $283,467, or 111%, to $539,591 from $256,124 during
the six months ended December 31, 1998. Operating costs related to commissions
for the six months ended December 31, 1999 increased $625,580, or 539%, to
$741,613 from $116,033 during the six months ended December 31, 1998. The cost
increases are directly related to the increased revenue.
General and administrative operating expenses increased $842,867, or 382%, to
$1,063,656 during the six months ended December 31, 1999 from $220,789 during
the six months ended December 31, 1998. This increase is primarily due to the
addition of staff and associated costs.
The Company incurred a loss from operations of $6,497,993 for the six months
ended December 31, 1999 compared with an operating loss of $5,448 for the six
months ended December 31, 1998. The primary increase in operating loss during
the current period is mostly related to the increased staff costs and the charge
for stock options granted to non employees.
Net interest expense for the six months ended December 31, 1999 of $68,250
compares to net interest expense during the six months ended December 31, 1998
of $0. The reason for this increase is due to increased borrowings during the
six months ended December 31, 1999. After interest expense, the net loss for the
six months ended December 31, 1999 was $6,549,516, or $(.23) per share, compared
to net loss of $5,448 for the six months ended December 31, 1998.
Liquidity and Capital Resources:
The Company has funded its operations to date primarily from shareholder
advances and stock subscriptions received. At December 31, 1999, the Company had
cash and cash equivalents of approximately $2,765,570 and working capital of
$2,439,859.
Cash used by the Company for operating activities during the six months ended
December 31, 1999 was approximately $859,535. A primary component of the use of
cash during the six months was the Company's net loss of $6,549,516 adjusted for
non-cash adjustments of depreciation and amortization of approximately $17,563
and stock option expense of $5,836,724. Additional uses of operating cash for
the six months included increases in the Company's accounts receivable of
$259,809, inventory of $10,589, other current assets of $152,596 and intangibles
and other assets of $9,076. Sources of operating cash were the increase in
payables and deferred revenue of $244,041 and $23,723, respectively. Additional
sources of cash include $21,248 from the acquisition of Cognigen. Additional
sources and uses of cash during the six months ended December 31, 1999 included
net proceeds from the receipt of stock subscriptions of $5,157,220, capital
expenditures of $158,363, payments on notes payable of $1,395,000 and a payment
for stock of $190,000.
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<PAGE>
SILVERTHORNE PRODUCTION COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company believes its current liquidity requirement primarily will be to meet
working capital requirements. Cash generated from operations was not sufficient
to meet working capital requirements for the six months ended December 31, 1999,
and may not be sufficient to meet working capital requirements for the
foreseeable future. Therefore, additional debt or equity financing may be
required for the Company to satisfy its short term capital needs. There can be
no assurances that the Company will be able to generate additional debt or
equity financing if needed.
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<PAGE>
Commission File Number: 0-11730
Quarter Ended December 31, 1999
Form 10-QSB
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) Recent Sales of Unregistered Securities
On August 20, 1999, Silverthorne Production Company (Silverthorne) completed the
first closing of the acquisition of all of the assets of Inter-American
Telecommunications Holding Corporation (ITHC) in exchange for 29,242,953 shares
of Silverthorne's common stock. On December 27, 1999, Silverthorne and ITHC
agreed that the total number of shares of Silverthorne's common stock that were
to be issued at the first closing was 11,742,953 shares rather than 29,242,953
shares and that the total number of shares to be issued by Silverthorne to ITHC
at the second closing is 37,298,444 shares. Further, Silverthorne and ITHC made
it clear that Silverthorne was acquiring all of the assets and assuming all of
the liabilities of ITHC as of August 20, 1999. The shares were issued in
reliance upon the exemption from registration contained in Section 4(2) of the
Securities Act of 1933, as amended ("Securities Act"). ITHC had available to it
full information concerning Silverthorne and the certificates representing the
shares have a legend prohibiting transfer unless the shares are registered under
the Securities Act or the transfer is exempt from the registration requirements
thereof. No underwriter was involved in the transaction. Silverthorne issued
5,000,000 shares of Silverthorne's common stock as finders' fees in connection
with the transaction.
During the three months ended December 31, 1999, Silverthorne received
subscriptions for 9,802,050 shares of Silverthorne's common stock at prices of
$0.38 per share (8,875,250 shares) and $1.60 per share (926,800 shares) from
various persons. The subscriptions were received as a result of offers that were
made pursuant to Regulation S adopted under the Securities Act. The
subscriptions were accepted during the period ended December 31, 1999. All of
the offers and sales of the shares were made in "offshore transactions" as
defined in Regulation S and appropriate "offering restrictions" as defined in
Regulation S were implemented in connection with the sales. Further, all of the
stock certificates issued to the purchasers have a legend prohibiting transfer
of the shares unless the shares are registered under the Securities Act or the
transfer is exempt from the registration requirements thereof. The Company paid
a fee of 12% of the total proceeds received from the sale of the common stock to
a distributor and later agreed to issue warrants to purchase 1,500,000 shares of
Silverthorne's common stock to various persons in connection with the sales and
previous sales made during the three months ended September 30, 1999. Further,
ITHC and another Company transferred 200,000 shares of Silverthorne's common
stock to two persons in connection with all of the sales.
- 13 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Stock Purchase and Asset Acquisition Agreement by and among
Inter-American Telecommunications Holding Corporation, Silverthorne
Production Company, et al. (incorporated by reference to Exhibit 2 to
the Current Report on Form 8-K/A dated August 20, 1999 that was filed
by Silverthorne Production Company on March 8, 2000).
2.2 Amendment dated December 27, 1999, to Stock Purchase and Asset
Acquisition Agreement by and among Silverthorne Production Company,
Inter-American Telecommunications Holding Corporation, et al.
(incorporated by reference to Exhibit 2 to the Current Report on Form
8-K that was filed by Silverthorne Production Company on January 3,
2000).
3.1 Bylaws of Silverthorne Production Company adopted on December 8, 1999.
27 Financial Data Schedule
- 14 -
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SILVERTHORNE PRODUCTION COMPANY
By: /s/ Jimmy L. Boswell
Jimmy L. Boswell
President and Chief Operating
Officer
By: /s/ David G. Lucas
David G. Lucas
Chief Financial Officer
Denver, Colorado
March 16, 2000
- 15 -
Adopted December 8, 1999
BYLAWS
OF
SILVERTHORNE PRODUCTION COMPANY
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 each year on a date and at a time fixed by the board of directors of the
corporation (or by the chairman of the board, the chief executive officer or the
president in the absence of action by the board of directors), for the purpose
of electing directors and for the transaction of such other business as may come
before the meeting. If the election of directors is not held on the day fixed as
provided herein 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 (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call of or proper demand for a special
meeting and notice of the special meeting was not given within thirty days after
the date of the call or the date the last of the demands necessary to require
calling of the meeting was received by the corporation, 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
chairman of the board, by the chief executive officer, by the president or by
the board of directors. The chief executive officer or 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
of directors, the place of meeting shall be the principal office of the
corporation.
Section 4. Notice of Meeting. Written notice stating the place, date, and
time of the meeting shall be given not less than ten nor more than sixty days
before the date of the meeting, except that (i) if the number of authorized
shares is to be increased, at least thirty days notice shall be given, or (ii)
any other longer notice period shall be given if 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 (i) an amendment
to the articles of incorporation of the corporation, (ii) a merger or share
exchange in which the corporation is a party and, with respect to a share
exchange, in which the corporation's shares will be acquired, (iii) a sale,
lease, exchange or other disposition, other than in the usual and regular course
of business, of all or substantially all of the property of the corporation or
of another entity which this corporation controls, in each case with or without
the goodwill, (iv) a dissolution of the corporation, or (v) any other purpose
for which a statement of purpose is required by the Colorado Business
Corporation Act. 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 chief executive officer,
the president, the secretary, or the officer or persons calling the meeting, to
each shareholder of record entitled to vote at such meeting. If mailed and if in
a comprehensible form, such notice shall be deemed to be given and effective
when deposited in the United States mail, addressed to the shareholder at his
address as it appears in the corporation's current record of shareholders, with
postage prepaid. If notice is given other than by mail, and provided that such
notice is in a comprehensible form, the notice is given and effective on the
date received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
secretary shall give notice thereof at corporate expense. No notice need be sent
to any shareholder if three successive notices mailed to the last known address
of such shareholder have been returned as undeliverable until such time as
another address for such shareholder is made known to the corporation by such
shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the corporation in writing of any change in such
shareholder's mailing address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for the
adjourned meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver shall
be delivered to the corporation for filing with the corporate records. Further,
by attending a meeting either in person or by proxy, a shareholder waives
objection to lack of notice or defective notice of the meeting unless the
shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of notice
or defective notice. By attending the meeting, the shareholder also waives any
objection to consideration at the meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, or (iii)
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
board of 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 the corporation first receives a
writing upon which the action is taken. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
Section 6. Voting Lists. The secretary shall make, at the earlier of ten
days before each meeting of shareholders or two business days after notice of
the meeting has been given, a complete list of the shareholders entitled to be
given notice of such meeting or any adjournment thereof. The list shall be
arranged by voting groups and within each voting group by class or series of
shares, shall be in alphabetical order within each class or series, and shall
show the address of and the number of shares of each class or series held by
each shareholder. For the period beginning the earlier of ten days prior to the
meeting or two business days after notice of the meeting is given and continuing
through the meeting and any adjournment thereof, this list shall be kept on file
at the principal office of the corporation, or at a place (which shall be
identified in the notice) in the city where the meeting will be held. Such list
shall be available for inspection on written demand by any shareholder
(including for the purpose of this Section 6 any holder of voting trust
certificates) or his agent or attorney during regular business hours and during
the period available for inspection. The original stock transfer books shall be
prima facie evidence as to the shareholders entitled to examine such list or to
vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) 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, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) 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 (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board of directors
deems necessary or desirable. Upon receipt by the corporation of a certificate
complying with the procedure established by the board of directors, the persons
specified in the certification shall be deemed, for the purpose or purposes set
forth in the certification, to be the registered holders of the number of shares
specified in place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. One third of the votes entitled to
be cast on a matter by a voting group shall constitute a quorum of that voting
group for action on the matter. If less than one third of such votes are
represented at a meeting, a majority of the votes so represented may adjourn the
meeting from time to time without further notice, for a period not to exceed 120
days for any one adjournment. If a quorum is present at such adjourned meeting,
any business may be transacted which might have been transacted at the meeting
as 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 it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be filed with
the secretary of the corporation before or at the time of the meeting. The
appointment of a proxy is effective when received by the corporation and is
valid for eleven months unless a different period is expressly provided in the
appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the original
appointment for any purpose for which the original appointment could be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 of Article II 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 extended,
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, except to the extent that the
voting rights of the shares of any class or classes are extended, limited or
denied by the articles of incorporation as permitted by the Colorado Business
Corporation Act.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender of
the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(iii)the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence
of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy
appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign for
the shareholder has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-tenants or fiduciaries, and the person signing appears to be acting
on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment
or proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this Section
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.
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. A
director shall be a natural person who is 18 years of age or older. A director
need not be a resident of Colorado or a shareholder of the corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act.
Section 3. Vacancies. Any director may resign at any time by giving
written notice to the corporation. Such resignation shall take effect at the
time the notice is received by the corporation unless the notice specifies a
later effective date. Unless otherwise specified in the notice of resignation,
the corporation's acceptance of such resignation shall not be necessary to make
it effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders or the board of directors. If
the directors remaining in office constitute fewer than a quorum of the board of
directors, 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 chairman of the board, the president
or any two directors. The person or persons authorized to call special meetings
of the board of directors may fix any place, either within or outside Colorado,
as the place for holding any special meeting of the board of directors called by
them.
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 (i) three days after such notice is deposited
in the United States mail, properly addressed, with postage prepaid, or (ii) the
date shown on the return receipt, if mailed by registered or certified mail
return receipt requested. If notice is given by telex, electronically
transmitted facsimile or other similar form of wire or wireless communication,
such notice shall be deemed to be given and to be effective when sent, and with
respect to a telegram, such notice shall be deemed to be given and to be
effective when the telegram is delivered to the telegraph company. If a director
has designated in writing one or more reasonable addresses or facsimile numbers
for delivery of notice to him, notice sent by mail, telegraph, telex,
electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time and date
of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records. Further, a
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless at the beginning of the meeting, or promptly
upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by the
board of directors pursuant to Section 2 of Article III 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 board of directors 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 of
directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (i) the director objects at the
beginning of the meeting, or promptly upon his later arrival, to the holding of
the meeting or the transaction of business at the meeting and does not
thereafter vote for or assent to any action taken at the meeting, (ii) the
director contemporaneously requests that his dissent or abstention as to any
specific action taken be entered in the minutes of the meeting, or (iii) the
director causes written notice of his 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 of directors shall not be
available to a director who voted in favor of such action.
Section 11. Committees. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have all
the authority of the board of directors, except that no such committee shall
have the authority to (i) authorize distributions, (ii) approve or propose to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders, (iii) fill vacancies on the board of
directors or any committee thereof, (iv) amend articles of incorporation, (v)
adopt, amend or repeal the bylaws, (vi) approve a plan of merger not requiring
shareholder approval, (vii) authorize or approve the reacquisition of shares
unless pursuant to a formula or method prescribed by the board of directors, or
(viii) 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 or committee members 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 of directors) 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.
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 of directors, 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 (i) one
or more officers or employees of the corporation whom the director reasonably
believes to be reliable and competent in the matters presented, (ii) 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 (iii) 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,
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 of directors may appoint such other officers, assistant
officers, committees and agents, assistant secretaries and assistant treasurers,
as they may consider necessary. The board of directors or the officer or
officers authorized by the board of directors 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
of directors 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 possible. 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 Article IV, Section 3.
Section 3. Resignation and Removal. An officer may resign at any time by
giving written notice of resignation to the corporation. The resignation is
effective when the notice is received by the corporation unless the notice
specifies a later effective date.
Any officer or agent may be removed at any time with or without cause by
the board of directors or an officer or officers authorized by the board of
directors or by the shareholders. 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 of directors, 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 of directors, 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 of directors 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. Chairman of the Board. The chairman of the board of directors,
if appointed and if available, or if not appointed or not available, the
president, shall preside at all meetings of the stockholders and of the board of
directors.
Section 6. President. Subject to the direction and supervision of the
board of directors, the president shall have general and active control of the
corporation's 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 7. Vice Presidents. If appointed, the vice presidents shall assist
the chairman of the board and the president and shall perform such duties as may
be assigned to them by the chairman of the board and the president or by the
board of directors. In the absence of the chairman of the board and 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 of directors
makes no such designation, then the vice president designated by the chairman of
the board, or by the president, or if neither the board of directors, the
chairman of 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 chairman of the board and the president.
Section 8. Secretary. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors, a record of all actions taken by the shareholders or board
of directors without a meeting, a record of all actions taken by a committee of
the board of directors in place of the board of directors on behalf of the
corporation, and a record of all waivers of notice of meetings of shareholders
and of the board of directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these bylaws and as
required by law, (iii) 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, (iv) 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, (v) 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, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) 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 as the secretary, 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 9. 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 of
directors, shall make such reports to it as may be required at any time. He
shall, if required by the board of directors, give the corporation a bond in
such sums and with such sureties as shall be satisfactory to the board of
directors, conditioned upon the faithful performance of his duties and for the
restoration to the corporation of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the corporation. He shall have such other powers and perform such other duties
as may from time to time be prescribed by the board of directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties as the treasurer, 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 chief executive officer, the
president and the board of directors statements of account showing the financial
position of the corporation and the results of its operations.
<PAGE>
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 the president and by the secretary or by one or more other
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 the 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 or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss, destruction or
mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board of directors 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
Article 113 of 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 of
directors may at its discretion appoint one or more transfer agents, registrars
and agents for making payment upon any class of stock, bond, debenture or other
security of the corporation. Such agents and registrars may be located either
within or outside Colorado. They shall have such rights and duties and shall be
entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification of Certain Persons
Section 1. Indemnification. For purposes of Article VI, a "Proper Person"
means any person who was or is a party or is threatened to be made a party to
any threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee, fiduciary or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of any
foreign or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company, or other enterprise or employee benefit plan. The corporation
shall indemnify any Proper Person against reasonably incurred expenses
(including attorneys' fees), judgments, penalties, fines (including any excise
tax assessed with respect to an employee benefit plan) and amounts paid in
settlement reasonably incurred by him in connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article VI that he conducted himself in good faith and that he reasonably
believed (i) in the case of conduct in his official capacity with the
corporation, that his conduct was in the corporation's best interests, or (ii)
in all other cases (except criminal cases), that his conduct was at least not
opposed to the corporation's best interests, or (iii) 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 l 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 l 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 VI or where indemnification is ordered by a court in Section 5 of
this Article VI, 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 l of
this Article VI. This determination shall be made by the board of directors by a
majority vote of those present at a meeting at which a quorum is present, which
quorum shall consist of directors not parties to the proceeding ("Quorum"). If a
Quorum cannot be obtained, the determination shall be made by a majority vote of
a committee of the board of directors designated by the board, which committee
shall consist of two or more directors not parties to the proceeding, 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 (i) 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 of directors (including directors who are parties to the action) or
(ii) 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 VI, 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 l of this Article VI 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 of this Article VI 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 (i) a written affirmation of such Proper Person's good faith belief
that he has met the standards of conduct prescribed by Section l of this Article
VI, (ii) 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 (iii) 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 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 of directors unless the shareholders, in making, amending or
repealing a particular bylaw, expressly provide that the directors may not amend
or repeal such bylaw. The shareholders also shall have the power to make, amend
or repeal the bylaws of the corporation at any annual meeting or at any special
meeting called for that purpose.
Section 4. Gender. The masculine gender is used in these bylaws as a matter
of convenience only and shall be interpreted to include the feminine and neuter
genders as the circumstances indicate.
Section 5. Conflicts. In the event of any irreconcilable conflict between
these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
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.
[End of bylaws]
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