UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT
PURSUANT TO SECTION 14A
of the
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only [as permitted by Rule
14a-6(e)(2)]
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
KELLY'S COFFEE GROUP, INC.
--------------------------
(Name of Registrant as Specified in its Charter)
N/A
-------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
================================================================================
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction: 0
5) Total fee paid: $125.00
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed
================================================================================
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KELLY'S COFFEE GROUP, INC.
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Telephone (801) 575-8073
August 18, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of Kelly's
Coffee Group, Inc. to be held at 10:00 a.m. on Wednesday, the 20th day of
September, 2000 at 268 West 400 South, Suite 300, Salt Lake City, Utah 84101.
The accompanying Notice of Special Meeting and Proxy Statement describe the
specific matters that will be acted upon. In addition to these matters, we will
report on our progress and provide an opportunity for questions of general
interest to our stockholders.
Whether or not you plan to attend in person, it is important that your shares be
represented at the Special Meeting. PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE. The Board of Directors unanimously
recommends that the stockholders vote "FOR" on the matter on the proxy card.
Thank you.
Sincerely,
/s/ Richard D. Surber
----------------------
Richard D. Surber
Chairman of the Board
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KELLY'S COFFEE GROUP, INC.
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Telephone (801) 575-8073
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A Special Meeting of Stockholders of Kelly's Coffee Group, Inc. will be held at
268 West 400 South, Suite 300, Salt Lake City, Utah at 10:00 a.m. on Wednesday,
the 20th day of September, 2000. At the Special Meeting, stockholders will vote
on the following matter:
(1) Relocating the domicile of the Company from the State of Colorado to
the State of Nevada and to prepare and file with the appropriate
authorities all requisite documents and reports necessary to
accomplish the change of domicile.
Only stockholders of record at the close of business on August 3, 2000 are
entitled to notice of, and to vote at, the meeting and any adjournments thereof.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IMMEDIATELY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL
MEETING OF STOCKHOLDERS. EVEN IF YOU PLAN TO ATTEND THE MEETING, WE REQUEST YOU
TO COMPLETE AND RETURN THE ENCLOSED PROXY CARD.
Of course, if you attend the meeting in person, you may vote your shares
personally, even if you have already returned your Proxy. You may revoke your
Proxy at any time before the meeting either in writing or by personal
notification.
By Order of the Board of Directors
/s/ Kevin J. Schillo
---------------------------------------
Corporate Secretary
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KELLY'S COFFEE GROUP, INC.
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Telephone (801) 575-8073
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the Solicitation of proxies
for use at the Special Meeting of Stockholders (the "Meeting") of Kelly's Coffee
Group, Inc. (the "Company") to be held on Wednesday, the 20th day of September,
2000 at 10:00 a.m. local time at 268 West 400 South, Suite 300, Salt Lake City,
Utah, and at any and all adjournments thereof. The accompanying proxy is
solicited by the Board of Directors of the Company and is revokable by the
stockholder anytime before it is voted. For more information concerning the
procedure for revoking the proxy, see "General." This Proxy Statement is first
being mailed to stockholders on or about August 18, 2000.
Only stockholders of record at the close of business on August 3, 2000 are
entitled to notice of, and to vote at, the Meeting. At the record date, there
were 51,966,427 shares of the Company's common stock (the "Common Stock")
outstanding and each share is entitled to one vote at the meeting.
Any properly executed proxy returned to the Company will be voted in accordance
with the instructions indicated on thereon. If no instructions are marked with
respect to the matters to be acted upon, each such proxy will be voted in
accordance with the recommendations of the Board of Directors set forth in this
Proxy Statement.
MATTER TO BE CONSIDERED AT THE MEETING
Stockholders will be asked to consider and act upon one proposal at the Meeting.
The proposal is to change the domicile of incorporation of the Company from the
State of Colorado to the State of Nevada by way of a "migratory merger." The
sole purpose of such a merger is to change the Company's state of domicile. The
merger would not involve any change in the business, properties, management or
capital structure of the Company, except as otherwise set forth herein.
The matter to be considered at the Meeting has great significance to the
stockholders because, if approved, the Company would relocate its domicile of
incorporation to the State of Nevada. This could result in the change of
stockholder rights of the Company's current stockholders. Stockholders are urged
to carefully consider the information presented in this Proxy Statement.
RECORD DATE AND VOTING SECURITIES
The Company's securities entitled to vote at the Meeting consist of Common
Stock, par value $0.001 per share. Only stockholders of record at the close of
business on August 3, 2000 are entitled to notice of and to vote at the Meeting.
At the record date, the Company had outstanding 51,966,427 shares of Common
Stock which were owned by approximately 284 stockholders.
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Each holder of record of Common Stock on the record date is entitled to one vote
per share on the proposal presented at the Meeting, exercisable in person or by
proxy. The presence in person or by proxy of a majority of the outstanding
shares of Common Stock entitled to vote is necessary to constitute a quorum at
the Meeting. Assuming a quorum is present, the affirmative vote of the holders
of a majority of the shares of Common Stock issued and outstanding present in
person or represented by proxy is required for approval of the proposal to be
voted upon at the Meeting.
Any properly executed proxy returned to the Company will be voted in accordance
with the instructions indicated on thereon. If no instructions are marked with
respect to the matters to be acted upon, each such proxy will be voted in
accordance with the recommendations of the Board of Directors set forth in this
Proxy Statement.
QUORUM AND VOTES REQUIRED
The quorum necessary to conduct business at the special meeting consists of the
holders of a majority of the shares entitled to vote at the special meeting,
represented in person or by proxy. If there are not sufficient votes in
attendance at the meeting in person or by proxy for approval of any matters to
be voted upon at the special meeting, the special meeting may be adjourned to
permit further solicitation of proxies.
Under Article 7-117-101 of the Colorado Business Corporation Act, the current
proposal to reincorporate Kelly's Coffee Group, Inc. by means of a merger with a
wholly-owned Nevada subsidiary would ordinarily require the approval of
two-thirds of all of the shares entitled to vote on the matter. This is the
voting requirement imposed by the statute for corporations, such as Kelly's
Coffee Group, Inc., which were in existence prior to the time the Colorado
Business Corporation Act became effective on July 1, 1994. However, the statute
provides an exception from the two-thirds voting requirement for corporations
which already contained a provision in their articles of incorporation
establishing a different voting requirement in order to obtain shareholder
approval for mergers and other significant corporate transactions. Since the
Company's incorporation in April 1987, its articles of incorporation have
contained a provision which says that any action to be taken by shareholders of
the company may be taken by the vote of a majority of all of the shares entitled
to vote on such action whenever the Colorado corporate statute called for a
two-thirds vote instead. For this reason, the proposal to reincorporate Kelly's
Coffee Group, Inc. in Nevada need only be approved by a majority of all of the
shares entitled to vote on this matter at the special meeting.
On the record date, directors and officers beneficially owned 15,643,340 shares
of common stock. This represents 30.1% of the voting stock. These parties have
indicated that they intend to vote for the reincorporation proposal.
Shares abstaining or withheld from voting, as well as broker "non-votes," are
counted as shares represented at the special meeting in order to determine a
quorum, but will not be counted as votes cast in favor of the reincorporation
proposal. Therefore, abstentions and votes withheld, as well as broker
"non-votes," will have the effect of a vote against the reincorporation. The
term broker "non-votes" refers to shares held by brokers and other nominees or
fiduciaries that are present at the special meeting, but are not voted on a
particular matter because those persons are precluded from exercising their
voting authority as a result of the matter's non-routine nature.
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SOLICITATION PROCEDURES
Proxies will be solicited primarily by mail; however, our employees may also
solicit proxies in person or otherwise. We will not pay employees for these
services. We are requesting certain holders of record, including brokers,
custodians and nominees, to distribute proxy materials to beneficial owners and
to obtain the beneficial owners' instructions concerning the voting of proxies.
We will pay all costs of the proxy solicitation, and will reimburse brokers and
other persons for the expenses they incur in sending proxy materials to
beneficial owners.
The costs of soliciting proxies will be paid by the Company (estimated to be
under $10,000). In addition to the use of the mails, proxies may be personally
solicited by directors, officers or regular employees of the Company (who will
not be compensated separately for their services) by mail, telephone, telegraph,
cable or personal discussion. The Company will also request banks, brokers and
other custodians, nominees and fiduciaries to forward proxy materials to the
beneficial owners of stock held of record by such persons and request authority
for the execution of proxies. The Company will reimburse such entities for
reasonable out-of- pocket expenses incurred in handling proxy materials for the
beneficial owners of the Company's Common Stock.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted by delivering to the Secretary of the
Company a written notice of revocation bearing a later date than the proxy, by
duly executing a subsequent proxy relating to the same shares, or by attending
the Meeting and voting in person. Attendance at the Meeting will not in itself
constitute revocation of a proxy unless the stockholder votes their shares of
Common Stock in person at the Meeting. Any notice revoking a proxy should be
sent to the Secretary of the Company, Kevin Schillo, at Kelly's Coffee Group,
Inc., 268 West 400 South, Suite 300, Salt Lake City, Utah 84101.
All shares represented at the Meeting by a proxy will be voted in accordance
with the instructions specified in that proxy. Proxies received and marked
"Abstain" as to any particular proposal, will be counted in determining a
quorum, however, such proxies will not be counted for the vote on that
particular proposal. A majority of the shares represented at the meeting is
required to ratify any proposal presented. If no instructions are marked with
respect to the matters to be acted upon, each proxy will be voted FOR the matter
to be voted upon.
Please complete, date, sign and return the accompanying proxy promptly.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO COMPLETE,
DATE, SIGN AND RETURN THE ACCOMPANYING PROXY, NO MATTER HOW LARGE OR SMALL YOUR
HOLDING MAY BE.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership of
the Company's Common Stock as of August 3, 2000, with respect to: (i) each
person known to the Company to be the beneficial owner of more than five percent
of the Company's Common Stock; (ii) all directors; and (iii) directors and
executive officers of the Company as a group. The notes accompanying the
information in the table below are necessary for a complete understanding of the
figures provided below. As of August 3, 2000, there were 51,446,019 shares of
Common Stock issued and outstanding.
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<TABLE>
<CAPTION>
AMOUNT AND NATURE
TITLE OF NAME AND ADDRESS OF OF BENEFICIAL PERCENT
CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------------------- ------------------------------------------ ----------------------------------- ------------------
<S> <C> <C> <C>
Common Stock Richard Surber, President(1) 15,643,340 30.1%
($0.001 par value) 268 West 400 South, Suite 306
Salt Lake City, Utah 84101
Common Stock Oasis International Hotel & Casino 3,133,620 6.0%
($0.001 par value) 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock CyberAmerica Corporation 605,000 1.0%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Hudson Consulting Group, Inc. 3,904,720 7.5%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Directors and Executive Officers as a 15,643,340 30.1%
($0.001) par value Group
</TABLE>
PROPOSAL ONE
CHANGING THE COMPANY'S STATE OF INCORPORATION FROM COLORADO TO
NEVADA (the "REINCORPORATION")
At the special meeting, shareholders of Kelly's Coffee Group, Inc. common stock
will be asked to vote upon the reincorporation of Kelly's Coffee Group, Inc.,
which presently is a Colorado corporation, as a Nevada corporation. Kelly's
Coffee Group, Inc. will be merged with and into Kelly's Coffee Group, Inc., a
Nevada corporation, a wholly owned subsidiary organized under Nevada law, with
Kelly's Coffee Group, Inc., a Nevada corporation becoming the surviving
corporation. We sometimes refer to Kelly's Coffee Group, Inc., a Nevada
corporation as the Nevada corporation. The Nevada corporation's principal
executive office is located at 268 West 400 South, Suite 300, Salt Lake City,
Utah 84101, and its telephone number is (801) 575- 8073.
Effective July 28, 2000, the Board of Directors approved the reincorporation
proposal pursuant to the terms of the agreement and plan of merger, which is
attached as Appendix "A," by which Kelly's Coffee Group, Inc. will be merged
with and into Kelly's Coffee Group, Inc., a Nevada corporation. Shareholders of
Kelly's Coffee Group, Inc. common stock are being requested to consider and
approve the reincorporation proposal. We have summarized the material terms of
the agreement and plan of merger below. This summary is subject to and qualified
in its entirety by reference to the text of the agreement and plan of merger
itself. The affirmative vote of the holders of a majority of the outstanding
shares of our common stock entitled to vote is necessary for approval of the
reincorporation proposal.
--------------------
(1) Richard Surber may be deemed a beneficial owner of 15,643,340 shares of
the Company's common stock by virtue of his position as an officer and director
of Hudson Consulting Group, Inc., CyberAmerica Corporation, and Oasis
International Hotel & Casino, Inc. Of these 15,643,340 common shares, Mr. Surber
personally owns 8,000,000 shares, issued to him on November 1, 1999 for services
rendered.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL TO
REINCORPORATE FROM COLORADO TO NEVADA PURSUANT TO THE TERMS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER.
REASONS FOR PROPOSED REINCORPORATION IN NEVADA
We are requesting that the shareholders of Kelly's Coffee Group, Inc. common
stock approve the proposal to change the state of incorporation of Kelly's
Coffee Group, Inc. from Colorado to Nevada pursuant to the terms set forth in
the agreement and plan of merger.
NO CHANGE IN NAME, BUSINESS OR PHYSICAL LOCATION
The proposed merger will effect a change in the legal domicile of Kelly's Coffee
Group, Inc. and other changes of a legal nature, the most significant of which
are described below. However, the merger will not result in any change in our
name, business, management, location of our principal executive offices, assets,
liabilities or net worth (other than as a result of the costs incident to the
merger, which are immaterial). Our management, including all directors and
officers, will remain the same after the merger and will assume identical
positions with the Nevada corporation. Our common stock will continue to trade
without interruption on the Over the Counter Bulletin Board of the National
Association of Securities Dealers under the symbol KLYS.
THE NEVADA CORPORATION
The Nevada corporation that will be the surviving corporation was incorporated
under the Nevada Revised Statutes ("NRS") on August 3, 2000, exclusively for the
purpose of merging with Kelly's Coffee Group, Inc. Prior to the merger, the
Nevada corporation will have no material assets or liabilities and will not have
carried on any business.
The Nevada corporation's articles of incorporation and bylaws are substantially
identical to the current articles of incorporation and bylaws of Kelly's Coffee
Group, Inc., except for statutory references necessary to conform to the NRS and
other differences attributable to the differences between the NRS and the CBCA.
A copy of the Nevada corporation's articles of incorporation is attached as
Appendix "B." The articles of incorporation and bylaws of the Company and the
bylaws of Kelly's Coffee Group, a Nevada Corporation (the "Nevada Bylaws") are
available for inspection by shareholders of the Company at the principal offices
of the Company located at 268 West 400 South, Suite 300, Salt Lake City, Utah
84101. Telephone (801) 575-8073.
THE AGREEMENT AND PLAN OF MERGER
The agreement and plan of merger provides that Kelly's Coffee Group, Inc. will
merge with and into the Nevada corporation, with the Nevada corporation then
becoming the surviving corporation. The Nevada corporation will assume all
assets and liabilities of Kelly's Coffee Group, Inc., including obligations
under our outstanding indebtedness and contracts. Our existing Board of
Directors and officers will become the board of directors and officers of the
Nevada corporation for identical terms of office. The Nevada corporation will
also assume the name of "Kelly's Coffee Group, Inc." in the merger.
The agreement and plan of merger has been unanimously approved by our Board of
Directors. Consummation of the Merger is subject to the approval of the
Company's shareholders. The affirmative vote of a majority of the outstanding
shares of the corporation entitled to vote on the subject matter, who are
entitled to vote at the Special Meeting is required for the approval and
adoption of the Merger. If approved by the shareholders of Kelly's Coffee Group,
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Inc. common stock, it is anticipated that the merger will become effective
immediately upon the later of the filing of articles of merger with the
Secretary of State of Colorado in accordance with Article 7-111-105 of the CBCA
and the filing of articles of merger with the Department of State of Nevada in
accordance with Section 78-458 of the NRS. Prior to its effectiveness, however,
the Merger may be abandoned by the Board if, for any reason, the Board
determines that consummation of the Merger is no longer advisable.
Upon the effective date of the merger, each share of the Company's issued and
outstanding common stock will automatically be converted into one fully paid and
nonassessable share of common stock, $0.0001 par value per share, of the Nevada
corporation. Each currently outstanding stock option, stock warrant, convertible
preferred stock and other right to subscribe for or purchase our shares
automatically will be converted into the same right to subscribe for or purchase
the same number of shares of the Nevada corporation's common stock. We do not
intend to issue new stock certificates to shareholders of record upon the
effective date of the merger. Instead, each certificate representing issued and
outstanding shares of our common stock immediately prior to the effective date
of the merger will evidence ownership of the shares of common stock of the
Nevada corporation after the effective date of the merger.
We anticipate that delivery of existing certificates of our common stock will
constitute "good delivery" of shares of common stock of the Nevada corporation
in transactions on the Over the Counter Bulletin Board of the National
Association of Securities Dealers after the merger.
PLEASE NOTE: Shareholders need not exchange their existing stock certificates
for stock certificates of the Nevada corporation. However, after consummation of
the merger, any shareholders desiring new stock certificates representing common
stock of the Nevada corporation may submit their existing stock certificates to
Corporate Stock Transfer, Inc., the surviving corporation's transfer agent for
cancellation, and obtain new certificates.
DESCRIPTION OF CAPITAL STOCK AND VOTING RIGHTS
The Company's authorized capital consists of 100,000,000 shares of Common Stock,
$0.001 par value and 50,000,000 shares of Preferred Stock $0.001 par value. As
of August 3, 2000 there were 51,966,427 shares of Common Stock outstanding and 0
shares of Preferred Stock outstanding. The holders of Common Stock are entitled
to vote on all matters to come before a vote of the shareholders of the Company.
COMPARISON OF SHAREHOLDER RIGHTS UNDER NEVADA AND COLORADO
CORPORATE LAW AND CHARTER DOCUMENTS BEFORE AND AFTER
REINCORPORATION
The Company is incorporated in the State of Colorado, and the surviving
corporation in the merger is incorporated in the State of Nevada. The Company's
shareholders, whose rights are currently governed by the Colorado Business
Corporation Act ("CBCA") and the Company's articles of incorporation and bylaws,
will, upon consummation of the merger, become shareholders of the Nevada
corporation and their rights will be governed by the Nevada Revised Statutes
("NRS") and the articles of incorporation and bylaws of the Nevada corporation.
Upon the filing with and acceptance by the Secretary of State of Nevada of
Articles of Merger in Nevada, the Company will become Kelly's Coffee Group,
Inc., a Nevada Corporation, ("Kelly's Nevada") and the outstanding shares of
Company Common Stock will be deemed for all purposes to evidence ownership of,
and to represent, shares of Kelly's Nevada Common Stock.
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The Nevada Charter Documents will replace the Company's current Articles of
Incorporation, as amended ("Colorado Articles") and the Colorado Bylaws
(together, the "Colorado Charter Documents") including providing officers,
directors and agents of Kelly's Nevada with certain indemnification rights in
addition to those currently provided for the Company.
The following is a summary of the material differences between (a) the CBCA and
our current articles of incorporation and bylaws and (b) the NRS and the
articles of incorporation and bylaws of the Nevada corporation. This summary is
not intended to be relied upon as an exhaustive list of all differences or a
complete description of the differences, and is qualified in its entirety by
reference to the CBCA, the NRS, and the articles of incorporation and bylaws of
the Nevada corporation.
AUTHORIZED CAPITAL STOCK
NEVADA CORPORATION
The following discussion is qualified in its entirety by reference to the Nevada
Charter Documents. The authorized capital stock of Kelly's Nevada, upon
effectuation of the transaction set forth in the Merger Agreement is
1,050,000,000 shares as hereinafter set forth. The description of the classes of
shares and a statement of the number of shares in each class and the relative
rights, voting power, restrictions and preferences granted to and imposed upon
the shares of each class are discussed below.
COMMON STOCK. The total number of shares of Common Stock this Corporation shall
have the authority to issue is one Billion (1,000,000,000). The Common Stock
shall have a stated par value of $0.001 per share. Each share of Common Stock
shall have, for all purposes one (1) vote per share. The holders of Common Stock
issued and outstanding have and possess the right to receive notice of
shareholders' meetings and to vote upon the election of directors or upon any
other matter as to which approval of the outstanding shares of Common Stock or
approval of the common shareholders is required or requested.
PREFERRED STOCK. The total number of shares of Preferred Stock this Corporation
is authorized to issue is fifty million (50,000,000) shares with a stated par
value of $0.001 per share. The Board of Directors is hereby authorized from time
to time, without shareholder action, to provide for the issuance of Preferred
Stock in one or more series not exceeding in the aggregate the number of
Preferred Stock authorized by these Articles of Incorporation, as amended from
time to time. The Board of Directors of the Corporation is vested with authority
to determine and state the designations and the preferences, limitations,
relative rights, and voting rights, if any of each such series by the adoption
and filing in accordance with the Nevada Revised States, before the issuance of
any shares of such series, of an amendment or amendments to these Articles of
Incorporation determining the terms of such series, which amendment need not be
approved by the shareholder or the holders of any class or series of shares
except as provided by law. All shares of Preferred Stock of the same series
shall be identical with each other in all respects.
VOTING RIGHTS WITH RESPECT TO EXTRAORDINARY CORPORATE TRANSACTIONS
NEVADA. Approval of consolidations and sales, leases or exchanges of all or
substantially all of the property or assets of a corporation, requires the
affirmative vote or consent of the holders of a majority of the outstanding
shares entitled to vote thereon.
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COLORADO. Under the Colorado Business Corporations Act ("CBCA"), amendments to
the articles of incorporation, other than ministerial amendments, which may be
authorized by the directors without shareholder action, may be proposed by the
board of directors or by the holders of shares representing at least 10% of all
of the votes entitled to be cast on the amendment. The board of directors must
recommend the amendment to the shareholders, unless the amendment is being
proposed by shareholders, or unless the board determines that because of
conflict of interest or other special circumstances it should make no
recommendation and communicates the basis for its determination to the
shareholders with the amendment. The board may also condition the submission of
the proposed amendment to the shareholders on any basis (such as by requiring a
greater number of affirmative votes by shareholder than are discussed below in
order to approve an amendment to the articles of incorporation).
For corporations like the Company which were already in existence on July 1,
1994, the date the CBCA went into effect. Shareholders of these corporations
must generally approve an amendment to the articles of incorporation by two
thirds vote unless these corporations had adopted, prior to this date, a
provision in their articles of incorporation calling for a different voting
requirement. The Company's articles of incorporation contained such a provision,
adopted prior to July 1, 1994, which has the effect of requiring a majority
vote, rather than a two-thirds vote, for amendments to the articles of
incorporation.
SHAREHOLDERS CONSENT WITHOUT A MEETING
NEVADA. Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if, before or after the action, a
written consent thereto is signed by shareholders holding at least a majority of
the voting power, except that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of written
consents is required. In no instance where action is authorized by written
consent need a meeting of shareholders be called or notice given.
COLORADO. Any action required or permitted by the CBCA to be taken at a
shareholders' meeting may be taken without a meeting if all of the shareholders
entitled to vote thereon consent to such action in writing. No action taken
without a meeting shall be effective unless the corporation has received
writings that describe and consent to the action, signed by all of the
shareholders entitled to vote on the action. Any such writing may be received by
the corporation by electronically transmitted facsimile or other form of wire or
wireless communication providing the corporation with a complete copy thereof,
including a copy of the signature thereto. Any shareholder who has signed a
writing describing and consenting to action taken pursuant to this section may
revoke such consent by a writing signed and dated 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 prior to the date the last
writing necessary to effect the action is received by the corporation.
If the Reincorporation is consummated, the number of shareholders required to
consent to an action without a shareholders meeting will decrease from all
shareholders providing their consent to the action in writing, to a simple
majority of the voting power shareholders consenting to the action in writing.
DISSENTERS' RIGHTS
NEVADA. Shareholders are entitled to demand appraisal of their shares in the
case of mergers or consolidations, except where: (i) they are shareholders of
the surviving corporation and the merger did not require their approval under
the Nevada Revised Statutes (NRS); (ii) the corporation's shares are either
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by The National Association
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of Securities Dealers, Inc.; or (iii) the corporation's shares are held of
record by more than 2,000 shareholders. Appraisal rights are available in either
(i), (ii) or (iii) above, however, if the shareholders are required by the terms
of the merger or consolidation to accept any consideration other than (a) stock
of the corporation surviving or resulting from the merger or consolidation, (b)
shares of stock of another corporation which are either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 shareholders, (c) cash in lieu of
fractional shares, or (d) any combination of the foregoing appraisal rights are
not available in the case of a sale, lease, exchange or other disposition by a
corporation of all or substantially all of its property and assets.
COLORADO. In addition to the rights and restrictions afforded dissenting
shareholders under Nevada law, a shareholder, whether or not entitled to vote,
is entitled to dissent and obtain payment of the fair value of the shareholder's
shares in the event of a reverse split that reduces the number of shares owned
by the shareholder to a fraction of a share or to scrip if the fractional share
or scrip so created is to be acquired for cash or the scrip is to be voided.
INCREASING OR DECREASING AUTHORIZED SHARES
NEVADA. Nevada law allows the Board of Directors of a Corporation, unless
restricted by the Articles of Incorporation, to increase or decrease the number
of authorized shares in the class or series of the corporations shares and
correspondingly effect a forward or reverse split of any such class or series of
the corporation's shares without a vote of the shareholders, so long as the
action taken does not change or alter any right or preference of the shareholder
and does not include any provision or provisions pursuant to which only money
will be paid or script issued to stockholders who hold 10% or more of the
outstanding shares of the affected class and series, and who would otherwise be
entitled to receive fractions of shares in exchange for the cancellation of all
of their outstanding shares.
COLORADO. Colorado law requires amendment of the Articles of Incorporation to
increase or decrease the number of authorized shares of any class, and further
provides that a proposal to effect a reverse split of any class of shares of a
corporation can only be accomplished by the affirmative vote of a majority of
the shareholders entitled to vote on the issue at a regularly convened
shareholder's meeting of the corporation at which a quorum of the shareholders
is present
DIVIDENDS
NEVADA. The Nevada Bylaws provide that, dividends on outstanding Preferred
Shares shall be paid or declared and set apart for payment before any dividends
shall be paid or declared and set apart for payment on the common shares with
respect to the same dividend period. If upon any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation, the assets available
for distribution to holders of Preferred Shares of all series shall be
insufficient to pay such holders the full preferential amount to which they are
entitled, then such assets shall be distributed ratably among the shares of all
series of Preferred Shares in accordance with the respective preferential
amounts (including unpaid cumulative dividends, if any) payable with respect
thereto. Subject to the cumulative dividend preferences to holders of Preferred
Shares, the shares of Common Stock are entitled to participate in any dividends
available therefore in equal amounts per share on all outstanding Preferred
Shares and Common Stock. Subject to the provisions for the payment of the
liquidation preference to the holders of Preferred Shares as provided herein,
the Common Stock is entitled to participate in all distributions to shareholders
made upon liquidation, dissolution, or winding up of the corporation in equal
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amounts per share as all outstanding Preferred Shares and Common Stock. The
Board of Directors is authorized, without shareholder action, to provide for the
issuance of Preferred Shares in one or more series not exceeding in the
aggregate the number of Preferred Shares authorized by the Certificate of
Incorporation, as amended from time to time; and to determine with respect to
each such series the voting powers, if any (which voting powers, if granted, may
be full or limited), designations, preferences, and relative, participating,
option, or other special rights and the qualifications, limitations, or
restrictions relating thereof.
COLORADO. The Colorado charter documents provide that the Preferred Shares shall
not receive a dividend, and that dividends may be paid upon the Common Stock, as
and when declared by the Board of Directors, out of funds of the Corporation to
the extent and in the manner provided by law.
If the Reincorporation is consummated, the Board of Directors of the Company
will have the authority to issue Preferred shares with a dividend preference
that was not available under the Colorado Charter documents.
ANTI-TAKEOVER STATUTES
NEVADA. Except under certain circumstances Nevada law prohibits a "business
combination" between the corporation and an "interested shareholder", however
the Nevada Articles expressly elect not to be governed by these provisions as
contained in NRS 87.411 to 78.444 inclusive. To the extent permissible under the
applicable law of any jurisdiction to which the corporation may become subject
by reason of the conduct of business, the ownership of assets, the residence of
shareholders, the location of offices or facilities, or any other item, the
Company has elected not to be governed by the provisions of any statute that (i)
limits, restricts, modified, suspends, terminates, or otherwise affects the
rights of any shareholder to cast one vote for each share of common stock
registered in the name of such shareholder on the books of the corporation,
without regard to whether such shares were acquired directly from the Company or
from any other person and without regard to whether such shareholder has the
power to exercise or direct the exercise of voting power over any specific
fraction of the shares of common stock of the Company issued and outstanding or
(ii) grants to any shareholder the right to have his or her stock redeemed or
purchased by the corporation or any other shareholder on the acquisition by any
person or group of persons of shares of the Company. In particular, to the
extent permitted under the laws of the state of Nevada, the Company elects not
to be governed by any such provision, including the provisions of the Nevada
Control Share Acquisitions Act, Sections 78.378 to 78.3793, inclusive, of the
Nevada Revised Statutes, or any statute of similar effect or tenor.
COLORADO. Colorado law does not specifically address anti-takeover provisions.
QUORUM OF DIRECTORS
NEVADA. A majority of the Board of Directors in office shall constitute a quorum
for the transaction of business, but if at any meeting of the Board there be
less than a quorum present, a majority of those present may adjourn from time to
time, until a quorum shall be present, and no notice of such adjournment shall
be required. The Board of Directors may prescribe rules not in conflict with
these Bylaws for the conduct of its business; provided, however, that in the
fixing of salaries of the officers of the corporation, the unanimous action of
all the directors shall be required.
COLORADO. A quorum at all meetings of the Board of Directors consists of a
majority of the number of directors then holding office, but a smaller number
may adjourn from time to time without further notice, until a quorum is secured.
The act of a majority of the Directors present at a meeting which a quorum is
present shall be the act of the Board of Directors.
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SPECIAL MEETINGS OF SHAREHOLDERS
NEVADA. Special meetings of the shareholders may be held at the office of the
corporation in the State of Nevada, or elsewhere, whenever called by the
President, or by the Board of Directors, or by vote of, or by an instrument in
writing signed by the holders of a majority of the issued and outstanding
capital stock. Not less than ten (10) nor more than sixty (60) days written
notice of such meeting, specifying the day, hour and place, when and where such
meeting shall be convened, and the objects for calling the same, shall be mailed
in the United States Post Office, or via express or overnight mail, addressed to
each of the shareholders of record at the time of issuing the notice, and at
his, her, or its address last known, as the same appears on the books of the
corporation. The written certificate of the officer or officers calling any
special meeting setting forth the substance of the notice, and the time and
place of the mailing of the same to the several shareholders, and the respective
addresses to which the same were mailed, shall be prima facie evidence of the
manner and fact of the calling and giving such notice.
COLORADO. A corporation shall hold a special meeting of shareholders: (a) On
call of its board of directors or the person or persons authorized by the bylaws
or resolution of the board of directors to call such a meeting; or (b) 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 the holders
of shares representing at least ten percent of all the votes entitled to be cast
on any issue proposed to be considered at the meeting. Special shareholders'
meetings may be held in or out of this state at the place stated in or fixed in
accordance with the bylaws, or, if not so stated or fixed, at a place stated in
or fixed in accordance with a resolution of the board of directors. If no place
is so stated or fixed, special meetings shall be held at the corporation's
principal office. Only business within the purpose or purposes described in the
notice of the meeting may be conducted at a special shareholders' meeting.
AMENDMENTS TO CHARTER
NEVADA. The articles of incorporation may be amended in any of the following
respects by a vote of a majority of the shareholders entitled to vote on an
amendment: (a) by addition to its corporate powers and purposes, or diminution
thereof, or both. (b) by substitution of other powers and purposes, in whole or
in part, for those prescribed by its articles of incorporation, (c) by
increasing, decreasing or reclassifying its authorized stock, by changing the
number, par value, preferences, or relative, participating, optional or other
rights, or the qualifications, limitations or restrictions of such rights, of
its shares, or of any class or series of any class thereof whether or not the
shares are outstanding at the time of the amendment, or by changing shares with
par value, whether or not the shares are outstanding at the time of the
amendment, into shares without par value or by changing shares without par
value, whether or not the shares are outstanding at the time of the amendment,
into shares with par value, either with or without increasing or decreasing the
number of shares, and upon such basis as may be set forth in the certificate of
amendment, (d) by changing the name of the corporation, (e) by making any other
change or alteration in its articles of incorporation that may be desired. If
any proposed amendment would alter or change any preference or any relative or
other right given to any class or series of outstanding shares, then the
amendment must be approved by the vote, in addition to the affirmative vote
otherwise required, of the holders of shares representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
COLORADO. The board of directors or the holders of shares representing at least
ten percent of all of the votes entitled to be cast on the amendment may propose
an amendment to the articles of incorporation for submission to the
shareholders. For an amendment to the articles of incorporation to be adopted
(a) The board of directors shall recommend the amendment to the shareholders
unless the amendment is proposed by shareholders or unless the board of
directors determines that, because of conflict of interest or other special
circumstances, it should make no recommendation and communicates the basis for
its determination to the shareholders with the amendment;
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shareholders with the amendment; and (b) such amendment shall be approved by
each voting group entitled to vote separately on the amendment by two-thirds of
all the votes entitled to be cast on the amendment by that voting group unless
the Company's Articles of Incorporation provide otherwise. The Company's
Articles of Incorporation provide for amendment upon the affirmative vote of a
majority of the shareholders voting on the issue.
NOTICE, ADJOURNMENT AND PLACE OF SHAREHOLDERS' MEETINGS
NEVADA. The Board of Directors may designate any place, either within or without
the state of incorporation, as the place of meeting for any annual or special
meeting. A waiver of notice, signed by all shareholders entitled to vote at a
meeting, may designate any place, either within or without the state of
incorporation, as the place for the holding of such meeting. If no designation
is made, the place of meeting shall be the registered office of the corporation
in the state of incorporation. Nevada Bylaws provide that the notification of
the annual meeting shall state the purpose or purposes for which the meeting is
called and the date, time, and the place, which may be within or without this
state, where it is to be held. A copy of such notice shall be either delivered
personally to, or shall be mailed with postage prepaid, to each shareholder of
record entitled to vote at such meeting not less than ten (10) nor more than
sixty (60) days before such meeting.
COLORADO. Written notice stating the place, day, and hour of the meeting, and,
in case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) days nor more than fifty (50)
days before the date of the meeting, either personally or by mail, by or at the
direction of the President, the Secretary, or the officer or person calling the
meeting to each shareholder of record entitled to vote at such meeting; except
that, if the authorized shares are to be increased, at least thirty days notice
shall be given, and if the sale of all or substantially all of the corporation's
assets is to be voted upon, at least twenty days notice shall be given.
DIRECTORS
NEVADA. The Nevada Certificate provides that the initial number of members of
the Nevada board shall be three (3), and thereafter shall not be less than one
nor more than seven (7), and may, at any time or times, be increased or
decreased by a duly adopted amendment to the Articles of Incorporation, or in
such manner as shall be provided in the Bylaws of the corporation or by an
amendment to the Bylaws of the corporation duly adopted by either the Board of
Directors or the Shareholders.
COLORADO. The Colorado Articles provide that the number of directors shall be
fixed by the Bylaws of the Corporation, with the provision that there need only
be only as many directors as there are shareholders in the event that the
outstanding shares are held of record by fewer than three shareholders. The
Bylaws provide that the Board shall not be more than seven (7) directors. A
majority of the number of directors constitutes a quorum for the transaction of
business. The Colorado Bylaws provide that a vacancy among the directors may be
filled for the unexpired term by the affirmative vote of a majority of the
remaining directors in office, though less than a quorum.
ELECTION AND REMOVAL OF DIRECTORS
NEVADA. The Nevada Bylaws provide each director shall hold office until the next
annual meeting of shareholders and until his or her successor shall have been
elected and qualified. At a meeting expressly called for the removal of one or
more directors, such directors may be removed by a vote of a majority of the
shares of outstanding stock of the corporation entitled to vote at an election
of directors. Vacancies on the board may be filled by the remaining directors.
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COLORADO. The Colorado Bylaws provide that each director shall hold office until
the next annual meeting of shareholders and until his or her successor shall
have been elected and qualified. Under Colorado law and the Colorado Charter
Documents, directors may be removed only if the number of votes cast in favor of
removal exceeds the number of votes cast against removal, with or without cause.
Vacancies on the board may be filled by the remaining directors or the
shareholders.
INSPECTION OF BOOKS AND RECORDS
NEVADA. Pursuant to the Bylaws of Kelly's Nevada, the Board of Directors shall
have power to close the share books of the corporation for a period of not to
exceed sixty (60) days preceding the date of any meeting of shareholders, or the
date for payment of any dividend, or the date for the allotment of rights, or
capital shares shall go into effect, or a date in connection with obtaining the
consent of shareholders for any purpose. In lieu of closing the share transfer
books as aforesaid, the Board of Directors may fix in advance a date, not
exceeding sixty (60) days preceding the date of any meeting of shareholders, or
the date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital shares
shall go into effect, or a date in connection with obtaining any such consent,
as a record date for the determination of the shareholders entitled to a notice
of, and to vote at, any such meeting and any adjournment thereof, or entitled to
receive payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to give such consent. If the share transfer books shall be
closed or a record date set for the purpose of determining shareholders entitled
to notice of or to vote at a meeting of shareholders, such books shall be closed
for, or such record date shall be, at least ten (10) days immediately preceding
such meeting.
COLORADO. Pursuant to the Colorado Bylaws, the officer or agent having charge of
the stock transfer on the books for shares of the corporation shall make, at
least ten days before such meeting of shareholders, a complete record of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address and the number of
shares held by each. The record, for a period of ten (10) days prior to such
meeting, shall be kept in file at the principal office of the company, whether
within or without the State of Colorado, and shall be subject to inspection by
any shareholder for any purpose germane to the meeting at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
for any purpose germane to the meeting during the whole time of the meeting for
the purposes thereof. The original stock transfer books shall be the prima facie
evidence as to who are the shareholders entitled to examine the record or
transfer books or to vote at any meeting of shareholders.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
NEVADA. Article 10. of the Nevada Charter documents state that the Nevada
Corporation expressly elects NOT to be governed by NRS 78.411 to 78.444
inclusive, which govern combinations with interested shareholders, affiliates
and associates of the Nevada Corporation. The result of this election provides
greater freedom to the Nevada Corporation regarding certain mergers,
consolidations, sales, transfers and other dispositions between itself and
interested shareholders of the Nevada Corporation.
COLORADO. The Company Articles in conjunction with the CBCA provide that no
contract or other transaction between the Corporation and one or more of its
directors or any other corporation, firm, association, or entity in which one or
more of its directors are directors or officers or are financially interested
shall either be void or voidable solely because of such relationship or interest
or solely because such directors are present at the meeting of the board of
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directors or a committee thereof which authorizes, approves, or ratifies such
contract or transaction or solely because their votes are counted for such
purpose if: (a) the fact of such relationship or interest is disclosed or know
to the board of directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purposes
without counting the votes or consents of such interested directors; or (b) the
fact that such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or (c) the contact or
transaction is fair and reasonable to the corporation. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the board of directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction.
LIMITATION ON LIABILITY OF DIRECTORS; INDEMNIFICATION OF OFFICERS AND
DIRECTORS
NEVADA. Pursuant to the Nevada Charter Documents, the corporation shall have the
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action, or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with any such action, suit or proceeding,
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, he or she had reasonable
cause to believe that his or her conduct was unlawful.
Kelly's Nevada Bylaws specifically provide that the corporation shall have the
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue, or matter as to which such a person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his or her duty to the corporation, unless and only to the extent that the court
in which the action or suit was brought shall determine on application that,
despite the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
COLORADO. The Colorado Articles and the CBCA provide that the corporation shall
eliminate or limit the personal liability of a director to the corporation or to
its shareholders for monetary damages for breach of fiduciary duty as a
director; except that any such provision shall not eliminate or limit the
liability of a director to the corporation or to its shareholders for monetary
damages for any breach of the director's duty of loyalty to the corporation or
to its shareholders, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or any transaction
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from which the director directly or indirectly derived an improper personal
benefit. No such provision shall eliminate or limit the liability of a director
to the corporation or to its shareholders for monetary damages for any act or
omission occurring before the date when such provision becomes effective. No
director or officer shall be personally liable for any injury to person or
property arising out of a tort committed by an employee unless such director or
officer was personally involved in the situation giving rise to the litigation
or unless such director or officer committed a criminal offense in connection
with such situation.
DISSENTERS' RIGHTS AS A RESULT OF THE REINCORPORATION MERGER
Shareholders have dissenters' rights in Colorado as a result of the proposed
Reincorporation. Shareholders who oppose the Reincorporation will have the right
to receive payment for the value of their shares pursuant to Colorado Revised
Statutes Annotated ("C.R.S.A.") C.R.S.A. section 7-113-101 et. sec. A copy of
Section 7-113-201 is attached hereto as Appendix "C" to this Proxy Statement.
The material requirements for a shareholder to properly exercise his or her
rights are summarized below. However, these provisions are very technical in
nature, and the following summary is qualified in its entirety by the actual
statutory provisions that should be carefully reviewed by any shareholder
wishing to assert such rights.
Under the Colorado Law, such dissenters' rights will be available only to those
common or preferred shareholders of the Company who (i) object to the proposed
Reincorporation in writing prior to or at the Annual Meeting before the vote on
the matter is taken (a negative vote will not itself constitute such a written
objection); and (ii) do not vote any of their shares in favor of the proposed
Reincorporation at the Annual Meeting.
Within ten days after the effective date of the Reincorporation, Kelly's Nevada
will send to each shareholder who has satisfied both of the foregoing conditions
a written notice in which Kelly's Nevada will notify such shareholders of their
right to demand payment for their shares and will supply a form for dissenting
shareholders to demand payment. Shareholders will have 30 days to make their
payment demands or lose such rights. If required in the notice sent by Kelly's
Nevada, each dissenting shareholder must also certify whether or not he or she
acquired beneficial ownership of such shares before or after the date of the
first announcement to the news media of the proposed transaction.
Upon receipt of each demand for payment, Kelly's Nevada will pay each dissenting
shareholder the amount that Kelly's Nevada estimates to be the fair value of
such shareholder's shares, plus interest from the date of the completion of the
Reincorporation to the date of payment. With respect to any dissenting
shareholder who does not certify that he or she acquired beneficial ownership of
the shares prior to the first public announcement of the transaction, Kelly's
Nevada may, instead of making payment, offer such payment if the dissenter
agrees to accept it in full satisfaction of his or her demand. "Fair value" with
respect to a dissenter's shares, means the value of the shares immediately
before the effectuation of the Reincorporation, excluding any appreciation or
depreciation in anticipation of such events. Any dissenter who does not wish to
accept the payment or offer made by Kelly's Nevada must notify Kelly's Nevada in
writing of his or her own estimate of the fair value of the shares within 30
days after the date Kelly's Nevada makes or offers payment. If the dissenting
shareholder and Kelly's Nevada are unable to agree on the fair value of the
shares, then Kelly's Nevada will commence a proceeding with the Colorado courts
within 60 days after receiving the dissenter's notice of his or her own estimate
of fair value. If Kelly's Nevada does not commence such a proceeding within the
60-day period, it must pay each dissenter whose demand remains unresolved the
amount demanded by such dissenter. If a proceeding is commenced, the court will
determine the fair value of the shares and may appoint one or more appraisers to
help determine such value.
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All dissenting shareholders must be a party to the proceeding, and all such
shareholders will be entitled to judgment against Kelly's Nevada for the amount
of the fair value of their shares, to be paid on surrender of the certificates
representing such shares. The judgment will include an allowance for interest
(at a rate determined by the court) to the date of payment. The costs of the
court proceeding, including the fees and expenses of any appraisers, will be
assessed against Kelly's Nevada unless the court finds that the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment at a higher
amount than that offered by Kelly's Nevada. Both Kelly's Nevada and the
dissenters must bear their own respective legal fees and expenses, unless the
court requires one party to pay such legal fees and expenses because of the
conduct of such party. The loss or forfeiture of appraisal rights simply means
the loss of the right to receive a cash payment from Kelly's Nevada in exchange
for shares. In such event the shareholder would still hold the appropriate
number of shares of Kelly's Nevada.
NEVADA. Shareholders are entitled to demand appraisal of their shares in the
case of mergers or consolidations, except where: (i) they are shareholders of
the surviving corporation and the merger did not require their approval under
the Nevada Revised Statutes (NRS); (ii) the corporation's shares are either
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by The National Association
of Securities Dealers, Inc.; or (iii) the corporation's shares are held of
record by more than 2,000 shareholders. Appraisal rights are available in either
(i), (ii) or (iii) above, however, if the shareholders are required by the terms
of the merger or consolidation to accept any consideration other than (a) stock
of the corporation surviving or resulting from the merger or consolidation, (b)
shares of stock of another corporation which are either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 shareholders, (c) cash in lieu of
fractional shares, or (d) any combination of the foregoing appraisal rights are
not available in the case of a sale, lease, exchange or other disposition by a
corporation of all or substantially all of its property and assets.
POSSIBLE DISADVANTAGES OF A CHANGE IN DOMICILE
You should be aware that although under Colorado law shareholder action by
written consent requires the unanimous vote of all shareholders entitled to vote
on the proposed action, Nevada permits shareholder action through majority
written consent, unless the articles of incorporation provide otherwise.
Moreover, Nevada law does not require that all shareholders entitled to vote on
a matter be notified or their written consent solicited. As such, a control
shareholder can eliminate the need for a shareholder meeting and general
solicitation of votes by written consents which are duly signed, dated and
delivered to the corporation. In addition, you should be aware that under
Colorado law, corporations are required to provide certain shareholders with ten
days prior notice before a corporation proceeds to authorize any loan or
guaranty for the benefit of any director. In contrast, Nevada law does not have
any such notice requirement, which means that shareholders will not have an
opportunity to consider the advisability of such a loan or guaranty to a
director. You should also be advised that whereas under Colorado law amendments
to a corporation's articles of incorporation may be proposed by holders of
shares representing at least 10% of all of the votes entitled to be cast on the
amendment, under Nevada law only the board of directors may propose amendments
to the articles of incorporation. Also, the Nevada corporation will be subject
to the provisions of Nevada law which provide that a person who acquires shares
in an issuing public corporation in excess of certain specified thresholds will
generally not have any voting rights with respect to such shares unless such
voting rights are approved by a majority of the shares entitled to vote. This
provision may have the effect of delaying, deferring or preventing a change of
control of the Nevada corporation. However, friendly acquisitions of a
corporation are still permitted, without having to comply with shareholder
voting requirements, if the board of directors of the corporation approves the
acquisition transaction before the control share acquisition occurs.
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INCORPORATION BY REFERENCE OF CERTAIN FINANCIAL INFORMATION
The following portions of the Company's Annual Report on Form 10-KSB for the
fiscal year ended February 29, 2000 are incorporated herein by reference: "Item
1. Business", "Item 5. Market Information for Common Equity and Related
Shareholder Matters", and "Item 7. Financial Statements." The following portions
of the Company's Quarterly Report on Form 10-QSB for the period ended May 31,
2000 are also incorporated herein by reference: "Part I. Item 1: Financial
Statements" and "Part I. Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations." Copies of these documents are
available without charge to any person, including any beneficial holder of the
Company's Common Stock to whom this Proxy Statement was delivered, on written or
oral request to Kelly's Coffee Group, Inc. 268 West 400 South, Suite 300, Salt
Lake City, Utah 84101, Attention: Secretary (telephone number: (801) 575-8073).
Any statement contained in a document all or a portion of which is incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this Proxy
Statement except as so modified or superseded.
The Company currently has 100,000,000 authorized shares of Common Stock, par
value $0.001 per share, of which 51,966,427shares were outstanding on August 3,
2000.
INCREASE IN CAPITALIZATION
The Company currently has 100,000,000 authorized shares of Common Stock, par
value $0.001 per share, of which 51,966,427 shares were outstanding on July 14,
2000. The Company currently has 50,000,000 authorized shares of Preferred Stock,
par value $0.001 per share, of which no shares are outstanding.
Kelly's Coffee Group, Inc. a Nevada Corporation, into which the Company will
merge to accomplish its change of domicile, if approved by the stockholders, is
authorized to issue 1,000,000,000 shares of common stock par value $0.0001 and
50,000,000 shares of preferred stock par value $0.0001. The effect of the merger
will be to increase the number of authorized common shares which may be issued
by the Company from 100,000,000 to 1,000,000,000.
Although currently authorized shares may be sufficient to meet anticipated needs
in the immediate future, the Board considers it desirable that the Company have
the flexibility to issue an additional amount of Common Stock without further
stockholder action, unless otherwise required by law or other regulations. The
availability of these additional shares will enhance the Company's flexibility
in connection with any possible acquisition or merger, stock splits or
dividends, financings and other corporate purposes and will allow such shares to
be issued without the expense and delay of a special stockholders' meeting,
unless such action is required by applicable law or rules of any stock exchange
on which the Company's securities may then be listed.
Presently, the Company has issued only one class of stock, Common Stock, par
value $0.001 per share. All of such shares are voting shares and have the same
voting rights. However, none of such shares confers any preemptive rights on the
holders thereof to purchase or receive any additional shares of the Company's
Common Stock or any other securities, rights or options for the Company's
securities authorized or acquired by the Company in the future. The Board may
issue the Common Stock and Preferred Stock authorized by the Company's Charter
for such consideration as may be fixed by the Board and for any corporate
purpose without further action by the stockholders, except as may be required by
law. Each share of Common Stock has equal dividend rights and participates
equally upon liquidation.
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FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The merger and resulting reincorporation of Kelly's Coffee Group, Inc. from
Colorado to Nevada will constitute a tax-free reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended. Accordingly,
for federal income tax purposes, no gain or loss will be recognized by
shareholders upon the conversion of Kelly's Coffee Group, Inc. common stock into
the Nevada corporation's common stock. Each shareholder whose shares are
converted into the Nevada corporation's common stock will have the same basis in
the common stock of the Nevada corporation as such shareholder had in the common
stock of Kelly's Coffee Group, Inc. held immediately prior to the effective date
of the merger. The shareholder's holding period in the Nevada corporation's
common stock will include the period during which the corresponding shares of
Kelly's Coffee Group, Inc. common stock were held.
PLEASE NOTE: No information is provided in this proxy statement regarding the
tax consequences, if any, under applicable state, local or foreign laws, and
each shareholder is advised to consult his or her personal attorney or tax
advisor as to the federal, state, local or foreign tax consequences of the
proposed reincorporation in view of the shareholder's individual circumstances.
In addition, neither the Company nor Kelly's Nevada will recognize gain or loss
as a result of the Reincorporation, and Kelly's Nevada will generally succeed,
without adjustment, to the tax attributes of the Company. Nevada has no
corporate income tax, no taxes on corporate shares, no franchise tax, no
personal income tax, no I.R.S. information sharing agreement, nominal annual
fees, minimal reporting and disclosure requirements, and shareholders are not
public record.
The foregoing summary of federal income tax consequences is included for general
information only and does not address all income tax consequences to all of the
Company's shareholders. The Company's shareholders are urged to consult their
own tax advisors as to the specific tax consequences of the Reincorporation with
respect to the application and effect of state, local and foreign income and
other tax laws.
SECURITIES ACT CONSEQUENCES
The shares of the Nevada corporation's common stock to be issued in exchange for
shares of Kelly's Coffee Group, Inc. common stock are not being registered under
the Securities Act of 1933. In that regard, the Nevada corporation is relying on
Rule 145(a)(2) under the Securities Act of 1933, which provides that a merger
which has "as its sole purpose" a change in the domicile of a corporation does
not involve the sale of securities for purposes of the Securities Act of 1933,
and on interpretations of the Rule by the Securities and Exchange Commission
which indicate that the making of certain changes in the Nevada corporation's
articles of incorporation which could otherwise be made only with the approval
of the shareholders of either corporation does not render Rule 145(a)(2)
inapplicable.
After the merger, the Nevada corporation will be a publicly-held company, the
Nevada corporation's stock will be listed for trading on the Over the Counter
Bulletin Board of the National Association of Securities Dealers under the
symbol KLYS, and will file periodic reports and other documents with the
Securities and Exchange Commission and provide to its shareholders the same
types of information that we have previously filed and provided. Shareholders
whose common stock was freely tradeable before the merger will continue to have
freely tradeable shares of the Nevada corporation's stock after the merger.
Shareholders holding restricted shares of common stock will have shares of the
Nevada corporation's stock which are subject to the same restrictions on
transfer as those to which their present shares of common stock are subject, and
their stock certificates, if surrendered for replacement certificates
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representing shares of the Nevada corporation's common stock will bear the same
restrictive legend as appears on their present stock certificates. For purposes
of computing compliance with the holding period requirement of Rule 144 under
the Securities Act of 1933, shareholders will be deemed to have acquired their
shares of the Nevada corporation's common stock on the date they acquired their
shares of Kelly's Coffee Group, Inc.'s common stock. In summary, the Nevada
corporation and its shareholders will be in the same respective positions under
the federal securities laws after the merger as were Kelly's Coffee Group, Inc.
and its shareholders prior to the merger.
AMENDMENT TO THE MERGER AGREEMENT; TERMINATION
The Merger Agreement may be terminated and the Reincorporation abandoned,
notwithstanding shareholder approval, by the Board of Directors of the Company
at any time before consummation of the Reincorporation if the Board of Directors
of the Company determines that in its judgment the Reincorporation does not
appear to be in the best interests of the Company or its shareholders. In the
event the Merger Agreement is terminated or the shareholders fail to approve the
Reincorporation, the Company would remain as a Colorado corporation.
RIGHTS OF DISSENTING SHAREHOLDERS
As indicated above under "Comparison of Shareholder Rights Before and After
Reincorporation - Dissenters' Rights", common stock shareholders have certain
dissenters' rights under Article 113 of the CBCA in connection with the
reincorporation of Kelly's Coffee Group, Inc. to Nevada. Upon strict compliance
with the notice and abstention from voting requirements summarized below,
shareholders may be entitled, pursuant to Article 113, to receive in cash the
fair value of their shares of Kelly's Coffee Group, Inc. capital stock. The
requirement to abstain from voting is only applicable to shareholders of Kelly's
Coffee Group, Inc. common stock because they are the only shareholders entitled
to vote at the special meeting.
The following summary does not purport to be a complete statement of the law
relating to dissenters' rights and is qualified in its entirety by Article 113
of the CBCA, a copy of which is attached hereto as Appendix "C". This summary
and Article 113 should be reviewed carefully by any shareholder who wishes to
exercise dissenters' rights or who wishes to preserve the right to do so, since
failure to comply strictly with the procedures set forth in Article 113 will
result in loss of such rights. Any shareholder who is considering dissenting
should consult their legal advisor.
ACTIONS TO BE TAKEN BEFORE THE MEETING
Notice to Kelly's Coffee Group, Inc. A shareholder who wishes to dissent must
provide us with a written notice of intent to demand payment for the dissenting
shares before the vote on the reincorporation proposal at the special meeting.
The notice must reasonably inform us of the identity of the shareholder and of
the shareholder's intent to demand payment for the shareholder's shares of
common stock if the reincorporation is completed. Neither a vote against the
reincorporation nor any proxy directing such vote, nor abstention from voting on
the reincorporation will satisfy the requirement for a written notice to us. All
such notices should be mailed to Kelly's Coffee Group, Inc., 268 West 400 South,
Suite 300, Salt Lake City, Utah 84101, Attn.: Richard D. Surber.
NO VOTING IN FAVOR OF REINCORPORATION
In addition to delivering a written notice of intent to demand payment, each
dissenting shareholder must not vote any of his or her shares of common stock in
favor of the reincorporation, either by proxy or at the special meeting.
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EXERCISE OF DISSENTERS' RIGHTS BY RECORD SHAREHOLDERS
Dissenters' rights must be exercised by the shareholders of record. Thus persons
who hold their interest in shares of our common stock through a nominee must
require the record shareholder to deliver to us a written notice of intent to
demand payment and otherwise to comply with the requirements (including the
requirement to cause the record shareholder to refrain from voting in favor of
the reincorporation) as to all of the shares of common stock held for such
beneficial owner.
ACTIONS TO BE TAKEN UPON OR AFTER APPROVAL OF THE REINCORPORATION
DISSENTERS' NOTICE
If the reincorporation proposal is authorized at the special meeting, then,
within ten days thereafter, we will provide each dissenting shareholder a
written notice stating the proposed effective date of the reincorporation, the
address where the form for the making of a payment demand must be sent and where
the certificate(s) representing their shares of our common stock must be
deposited, supplying each dissenting shareholder with a form for the making of a
payment demand, informing holders of uncertificated shares to what extent
transfers of such shares will be restricted after payment demand is received and
setting the date by which all forms for the making of a payment demand and
certificates representing the shares of our common stock must be received, which
date shall be not less than 30 days after the date of the written notice sent by
us to dissenting shareholders after the approval of the reincorporation proposal
at the special meeting. Such notice will be accompanied by a copy of Article 13
of the CBCA. Dissenting shareholders must, within the time and according to the
procedures set forth in such notice:
(1) Send us a duly completed form for the making of a payment demand
concerning such dissenting shareholder's shares of common stock; and
(2) Deposit with the party named on such notice the share certificates
representing such dissenting shareholder's shares of common stock.
A shareholder who demands payment retains all rights as a shareholder except the
right to transfer shares until the effective date of the proposed transactions
giving rise to the shareholder's dissent and only has the right to receive
payment for the shares after the effective date of the proposed transactions.
Unless the reincorporation does not become effective within sixty days of the
deadline for payment demands or we do not make payment on such payment demand
within sixty days, the delivery of a payment demand and the deposit of
certificates representing the dissenting shareholder's shares of common stock
are irrevocable.
Failure to comply strictly with the notice requirements for dissenting
shareholders described in this section will cause the loss of dissenters' rights
under Article 113 of the CBCA.
PAYMENT
Upon the effective date of the reincorporation or the receipt of the payment
demand, whichever is later, we will pay to all shareholders who have validly
exercised their dissenters' rights under Article 113 at the address shown on the
form for the making of a payment demand the amount we estimate is the fair value
of the dissenting shareholder's shares of common stock plus interest at the rate
provided in Article 113 of the CBCA from the effective date of the
reincorporation until the payment date. We also will provide the information
required by Article 13 of the CBCA to dissenting shareholders.
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NOTICE OF DISSATISFACTION WITH RESPONSE TO PAYMENT DEMAND
If a shareholder who has validly exercised dissenters' rights under Article 113
of the CBCA believes that (i) the amount offered or paid is less than the fair
value of his or her shares of common stock or that the interest was incorrectly
calculated; (ii) we have failed within sixty days to make the payment offered,
or (iii) we do not return deposited certificates when required to do so, the
dissenting shareholder may give notice to us of the shareholder's estimate of
the fair market value of his or her shares of common stock and the amount of
interest due and demand payment of such estimate, less any payment previously
made by us, or the dissenting shareholder may reject our offer and demand
payment of the fair value of the shares and interest due. Any objection by the
dissenting shareholder must be received by us within thirty days after we make
or offer payment for the dissenting shareholder's shares of common stock.
RESOLUTION OF DISSENTERS' PAYMENT OBJECTIONS
If a dissenter's demand for payment remains unresolved, then we may, within
sixty days of receipt thereof, request that a court determine the fair value of
the dissenting shareholder's shares and interest due thereon. If we do not
timely make such a request, we must pay the dissenting shareholder the amount
set forth in the dissenting shareholder's payment objection. In a proceeding
described in this paragraph, the court will appraise the dissenting
shareholder's shares of common stock and enter judgment in any amount by which
the court finds the value of the dissenting shareholder's shares of common
stock, plus interest, exceeds the amount paid by us, or in any amount the court
finds to be the fair value, plus interest, of the dissenting shareholder's
shares for which we elected to withhold payment under Article 113, section 208.
The court will assess costs of the appraisal proceeding against us, except that
it may assess costs against dissenters if it finds they acted not in good faith.
The court may also assess fees and expenses of experts and counsel against us or
against any party which it finds did not comply with requirements or acted not
in good faith.
This summary and the attached copy of Article 113 of the CBCA should be reviewed
carefully by any shareholder who wishes to exercise dissenters' rights or who
wishes to preserve the right to do so. Failure to comply strictly with all the
conditions for asserting rights as a dissenting shareholder, including the time
limits referred to herein, will result in loss of such dissenters' rights, and
such dissenters' shares of common stock will be entitled only to the payment
(consisting of stock of Kelly's Coffee Group, Inc., a Nevada corporation, in
exchange for shares of the Company's common stock) as provided in the agreement
and plan of merger.
RECOMMENDATION OF THE BOARD OF DIRECTORS
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES
THAT THE TRANSACTIONS CONTEMPLATED BY THE PROPOSED REINCORPORATION MERGER ARE
DESIRABLE AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" SUCH PROPOSAL.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented for
action at the Meeting. Section 7-107-102 of CBCA precludes consideration at a
Special Shareholders Meeting of any matters not described in the Notice of the
meeting. However, if any other matters properly come before the Meeting, the
persons named in the enclosed proxy will vote in accordance with their best
judgment.
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FINANCIAL INFORMATION
A copy of the Company's financial Statements for the year ended February 29,
2000 and the three month period ended May 31, 2000 are available for inspection
by shareholders of the Company at the principal offices of the Company located
at 268 West 400 South, Suite 300, Salt Lake City, Utah 84101. Telephone (801)
575- 8073.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
As used herein the term "Company" refers to Kelly's Coffee Group, Inc., a
Colorado corporation and its predecessors, unless the context indicates
otherwise. The Company discontinued its operations on February 28, 1998. The
Company is currently a shell company whose purpose will be to acquire operations
through an acquisition, merger or begin its own start-up business.
The Company is in the process of attempting to identify and acquire a favorable
business opportunity. The Company has reviewed and evaluated a number of
business ventures for possible acquisition or participation by the Company. The
Company has not entered into any agreement, nor does it have any commitment or
understanding to enter into or become engaged in a transaction as of the date of
this filing. The Company continues to investigate, review, and evaluate business
opportunities as they become available and will seek to acquire or become
engaged in business opportunities at such time as specific opportunities
warrant. The Company will continue in its attempts to settle its remaining
liabilities at a discount.
The Company has no plans for the purchase or sale of any plant or equipment.
The Company is a development stage company and currently has no employees. The
Company has no current plans to make any changes in the number of employees.
Results of Operations
The Company had no sales revenues for the three months ended May 31, 2000 and
1999. The Company had no sales for the three months ended May 31, 2000 because
it ceased operations as of February 28, 1998 as a result of recurring losses.
The Company had no costs of sales for the three months ended May 31, 2000 or
1999 because it ceased operations as of February 28, 1998.
General and administrative expenses were $6,666 for the three months ended May
31, 2000, compared to $0 for the same period in 1999. The general and
administrative expenses increased for the same period in 2000 because of
activities related to resolving debt and searching for an appropriate candidate
for a reverse merger.
The Company recorded net income of $26,793 for the three months ended May 31,
2000 compared to net income of $0 for the same period in 1999. The net income
recorded for the three months ended May 31, 2000 was attributable to $21,591 in
accrued interest on the debt from discontinued operations, which the company is
attempting to clear off the books, $6,666 in general administrative expenses,
and a gain of $50,050 from the settlement of debt with Robert Pallota, a former
director of the Company, and Mick Schumacher and Terry Seipert. For more
information on the settlement of claims, please see Part II, Item 2 "Changes in
Securities and Use of Proceeds."
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Capital Resources and Liquidity
At May 31, 2000, the Company had current assets of $3,176,585 and total assets
of $3,176,585. The Company had a net working capital surplus of $2,074,068 at
May 31, 2000.
Net stockholders' equity in the Company was $2,050,818 as of May 31, 2000.
The Company's working capital and stockholder's equity significantly improved as
a result of a change in the value of securities held for investment as well as
the elimination of $56,909 in liabilities. Previously the securities were held
at the lower of cost or market due to the nature of the investments and the lack
of a readily determinable fair value. Since the securities now meet the 1 year
guidelines for becoming readily tradeable, they have been marked to current
market values as of May 31,2000.
10-KSB AND 10-QSB REPORTS
THE COMPANY WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES WITH A COPY OF
ITS ANNUAL REPORT ON FORM 10-KSB, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S MOST RECENT FISCAL YEAR, AND ITS MOST RECENT
QUARTERLY REPORT ON FORM 10-QSB, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S MOST RECENT QUARTER, WITHOUT CHARGE, UPON RECEIPT
OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE DIRECTED TO CHIEF
FINANCIAL OFFICER, KELLY'S COFFEE GROUP, INC., 268 WEST 400 SOUTH, SUITE 300,
SALT LAKE CITY, UTAH 84101.
By Order of the Board of Directors
/s/ Kevin J. Schillo
--------------------------
Kevin J. Schillo
Secretary
Salt Lake City, Utah
August 15, 2000
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KELLY'S COFFEE GROUP, INC.
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby constitutes and appoints Richard D. Surber and Kevin J.
Schillo, with power of substitution, the proxies of the undersigned to attend
the special meeting of the stockholders of Kelly's Coffee Group, Inc. on
September 20, 2000, and any adjournment thereof, and to vote in his, her or its
place or stead the stock of the corporation held of record name by the
undersigned.
1. Proposal to empower the Board of Directors to take the necessary
corporate action to relocate the domicile of incorporation of the
Company from the State of Colorado to the State of Nevada;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. IF NO SPECIFIC DIRECTIONS ARE GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
-------------------------------- -------------------------------------
Print Name Signature of Stockholder
-------------------------------- -------------------------------------
Number of Shares Signature if Held Jointly
-------------------------------------
Date
Please sign exactly as name appears on the certificate or certificates
representing shares to be voted by this proxy. When signing as executor,
administrator, attorney, trustee or guardian, please give full titles as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized persons.
SEND PROXIES TO:
Kelly's Coffee Group
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
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Appendix "A"
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (hereinafter called the "Merger Agreement") is
made as of August 3, 2000, by and between Kelly's Coffee Group, Inc., a Colorado
corporation ("Kelly's Colorado"), and Kelly's Coffee Group, Inc., a Nevada
corporation ("Kelly's Nevada"). Kelly's Colorado and Kelly's Nevada are
sometimes referred to as the "Constituent Corporations."
Recitals
A. WHEREAS, The authorized capital stock of Kelly's Colorado consists of
150,000,000 shares of Common Stock, $0.001 par value of which 51,966,427 shares
are issued and outstanding, and 50,000,000 shares of preferred stock, $0.001 par
value of which 0 shares are issued and outstanding.
B. WHEREAS, the authorized capital stock of Kelly's Nevada, upon effectuation of
the transactions set forth in this Merger Agreement, will consist of
1,000,000,000 shares of Common Stock, $0.001 par value and 50,000,000 shares of
Preferred Stock, $0.001 par value.
C. WHEREAS, the directors of the Constituent Corporations deem it advisable and
to the advantage of the Constituent Corporations that Kelly's Colorado merge
with and into Kelly's Nevada upon the terms and conditions herein provided, for
the sole purpose of effecting a change of domicile from the State of Colorado to
the State of Nevada.
D. WHEREAS, the merger will have no effect or change in the nature of the
business or management of the resulting business operating through the surviving
corporation.
Agreement
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Kelly's Colorado
shall merge into Kelly's Nevada on the following terms, conditions and other
provisions:
1. TERMS AND CONDITIONS.
1.1 Merger. Kelly's Colorado shall be merged with and into Kelly's
Nevada (the "Merger"), and Kelly's Nevada shall be the surviving corporation
(the "Surviving Corporation") effective upon the date when this Merger Agreement
is filed with the Secretary of State of Nevada (the "Effective Date").
1.2 Succession. On the Effective Date, Kelly's Nevada shall continue
its corporate existence under the laws of the State of Nevada, and the separate
existence and corporate organization of Kelly's Colorado, except insofar as it
may be continued by operation of law, shall be terminated and cease.
1.3 Transfer of Assets and Liabilities. On the Effective Date, the
rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the disabilities,
duties and restrictions of or upon each of the Constituent Corporations; and all
and singular rights,privileges, powers and franchises of each of the Constituent
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Corporations, and all property, real, personal and mixed, of each of the
Constituent Corporations, and all debts due to each of the Constituent
Corporations on whatever account, and all things in action or belonging to each
of the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter the property
of the Surviving Corporation as they were of the Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; provided, however, that the liabilities of the Constituent
Corporations and of their shareholders, directors and officers shall not be
affected and all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and any claim
existing or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not taken place
except as they may be modified with the consent of such creditors and all debts,
liabilities and duties of or upon each of the Constituent Corporations shall
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if such debts, liabilities and duties had been incurred or contracted
by it.
1.4 Common Stock of Kelly's Colorado and Kelly's Nevada. On the
Effective Date, by virtue of the Merger and without any further action on the
part of the Constituent Corporations or their shareholders, (i) each share of
Common Stock of Kelly's Colorado issued and outstanding immediately prior
thereto shall be converted into shares of fully paid and nonassessable shares of
the Common Stock of Kelly's Nevada at a ratio of 1 to 1, and (ii) each share of
Common Stock of Kelly's Nevada issued and outstanding immediately prior thereto
shall be canceled and returned to the status of authorized but unissued shares.
1.5 Stock certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock or of the Preferred Stock of Kelly's Colorado shall be deemed for
all purposes to evidence ownership of and to represent the shares of Kelly's
Nevada into which the shares of Kelly's Colorado represented by such
certificates have been converted as herein provided and shall be so registered
on the books and records of the Surviving Corporation or its transfer agents.
The registered owner of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to and to receive
any dividend and other distributions upon the shares of Kelly's Nevada evidenced
by such outstanding certificate as above provided.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS.
2.1 Articles of Incorporation and Bylaws. The Articles of Incorporation
and Bylaws of Kelly's Nevada in effect on the Effective Date shall continue to
be the Articles of Incorporation and Bylaws of the Surviving Corporation.
2.2 Directors. The directors of Kelly's Colorado immediately preceding
the Effective Date shall become the directors of the Surviving Corporation on
and after the Effective Date to serve until the expiration of their terms and
until their successors are elected and qualified.
2.3 Officers. The officers of Kelly's Colorado immediately preceding
the Effective Date shall become the officers of the Surviving Corporation on and
after the Effective Date to serve at the pleasure of its Board of Directors.
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3. MISCELLANEOUS.
3.1 Further Assurances. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of Kelly's Colorado such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action, as shall be appropriate or necessary in order to vest or perfect in or
to conform of record or otherwise, in the Surviving Corporation the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Kelly's Colorado and otherwise
to carry out the purposes of this Merger Agreement, and the officers and
directors of the Surviving Corporation are fully authorized in the name and on
behalf of Kelly's Colorado or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
3.2 Amendment. At any time before or after approval by the shareholders
of Kelly's Colorado, this Merger Agreement may be amended in any manner (except
that, after the approval of the Merger Agreement by the shareholders of Kelly's
Colorado, the principal terms may not be amended without the further approval of
the shareholders of Kelly's Colorado) as may be determined in the judgment of
the respective Board of Directors of Kelly's Nevada and Kelly's Colorado to be
necessary, desirable, or expedient in order to clarify the intention of the
parties hereto or to effect or facilitate the purpose and intent of this Merger
Agreement.
3.3 Conditions To Merger. The obligations of the Constituent
Corporations to effect the transactions contemplated hereby is subject to
satisfaction of the following conditions (any or all of which may be waived by
either of the Constituent Corporations in its sole discretion to the extent
permitted by law): the Merger shall have been approved by the shareholders of
Kelly's Colorado in accordance with applicable provisions of the Colorado
Business Corporations Act; and Kelly's Colorado, as sole shareholder of Kelly's
Nevada, shall have approved the Merger in accordance with the General
Corporation Law of the State of Nevada; and any and all consents, permits,
authorizations, approvals, and orders deemed in the sole discretion of Kelly's
Colorado to be material to consummation of the Merger shall have been obtained.
3.4 Abandonment or Deferral. At any time before the Effective Date,
this Merger Agreement may be terminated and the Merger may be abandoned by the
Board of Directors of either Kelly's Colorado or Kelly's Nevada or both,
notwithstanding the approval of this Merger Agreement by the shareholders of
Kelly's Colorado or Kelly's Nevada, or the consummation of the Merger may be
deferred for a reasonable period of time if, in the opinion of the Boards of
Directors of Kelly's Colorado and Kelly's Nevada, such action would be in the
best interest of such corporations. In the event of termination of this Merger
Agreement, this Merger Agreement shall become void and of no effect and there
shall be no liability on the part of either Constituent Corporation or its Board
of Directors or shareholders with respect thereto, except that Kelly's Colorado
shall pay all expenses incurred in connection with the Merger or in respect of
this Merger Agreement or relating thereto.
3.5 Counterparts. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved by
the Board of Directors of Kelly's Colorado and Kelly's Nevada, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
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KELLY'S COFFEE GROUP, INC.,
a Colorado Corporation
By: /s/ Richard D. Surber By: /s/Kevin J. Schillo
------------------------------------------ ---------------------
Richard D. Surber, President and CEO Kevin J. Schillo, Secretary
KELLY'S COFFEE GROUP, INC.,
a Nevada Corporation
By: /s/ Richard D. Surber By: /s/Kevin J. Schillo
-------------------------------------- -------------------
Richard D. Surber, President and CEO Kevin J. Schillo, Secretary
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Appendix "B"
ARTICLES OF INCORPORATION OF KELLY'S COFFEE GROUP, INC.
ARTICLE 1.
Company Name
1.1 The name of this corporation is Kelly's Coffee Group, Inc.
ARTICLE 2.
Duration
2.1 The corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE 3.
Principal Office & Registered Agent
3.1 The resident agent and registered office located within the State of
Nevada is:
LaVonne Frost
711 South Carson St. Suite 1
Carson City, Nevada 89701
ARTICLE 4.
Purpose
4.1 The purpose for which the corporation is organized is to engage in any
lawful activity within or without the State of Nevada.
ARTICLE 5.
Board of Directors
5.1. Number. The members of the governing Board of the Corporation shall be
styled "Directors", and the first Board shall be three (3) in number. The Number
of directors shall not be reduced to less than one (1) nor exceed seven (7) and
may, at any time or times, be increased or decreased in such manner as shall be
provided in the Bylaws of the corporation or by an amendment to the Bylaws of
the corporation duly adopted by either the Board of Directors or the
Shareholders.
5.2 The names and addresses of the first Board of Directors are as follows:
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Richard D. Surber David Wolfson
268 West 400 South, Suite 300 268 West 400 South, Suite 300
Salt Lake City, Utah 84101 Salt Lake City, Utah 84101
Kevin J. Schillo
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
ARTICLE 6.
Capital Stock
6.1 Authorized Capital Stock. The total number of shares that may be issued
by the Corporation and that the Corporation will be authorized to have is One
Billion Fifty Million (1,050,000,000) of the par value per share hereinafter set
forth. A description of the classes of shares and a statement of the number of
shares in each class and the relative rights, voting power, and preferences
granted to and restrictions imposed upon the shares of each class are as
follows.
6.2 Common Stock. The total number of shares of Common Stock this
Corporation shall have the authority to issue is One Billion (1,000,000,000).
The Common Stock shall have a par value of $0.001 per share. Each share of
Common Stock shall have, for all purposes, one (1) vote per share. The holders
of Common Stock issued and outstanding have and possess the right to receive
notice of shareholders' meetings and to vote upon the election of directors or
upon any other matter as to which approval of the outstanding shares of Common
Stock or approval of the common shareholders is required.
6.3. Preferred Stock. The total number of shares of Preferred Stock this
Corporation is authorized to issue is Fifty million (50,000,000) shares with a
stated par value of $0.001 per share. The Board of Directors is hereby
authorized from time to time, without shareholder action, to provide for the
issuance of Preferred Stock in one or more series not exceeding in the aggregate
the number of Preferred Stock authorized by these Articles of Incorporation, as
amended from time to time. The Board of Directors of the Corporation is vested
with authority to determine and state the designations and the preferences,
limitations, relative rights, and voting rights, if any of each such series by
the adoption and filing in accordance with the Nevada Revised Statutes, before
the issuance of any shares of such series, of an amendment or amendments to
these Articles of Incorporation determining the terms of such series, which
amendment need not be approved by the stockholders or the holders of any class
or series of shares except as provided by law. All shares of Preferred Stock of
the same series shall be identical with each other in all respects.
ARTICLE 7.
No Further Assessments
7.1 The capital stock, after the amount of the subscription price has been
paid in money, property, or services, as the Board of Directors shall determine,
shall be subject to no further assessment to pay the debts of the corporation,
and no stock issued as fully paid up shall ever be assessable or assessed, and
these Articles of Incorporation shall not and cannot be amended, regardless of
the vote therefore, so as to amend, modify or rescind this Article 6., or any of
the provisions hereof.
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ARTICLE 8.
No Preemptive Rights
8.1 None of the shares of the Corporation shall carry with them any
preemptive right to acquire additional or other shares of the Corporation and no
holder of any stock of the Corporation shall be entitled, as of right, to
purchase or subscribe for any part of any unissued shares of stock of the
Corporation or for any additional shares of stock, of any class or series, which
may at any time be issued, whether now or hereafter authorized, or for any
rights, options, or warrants to purchase or receive shares of stock or for any
bonds, certificates of indebtedness, debentures, or other securities.
ARTICLE 9.
No Cumulative Voting
9.1 Shareholders will not have a right to cumulate their votes for the
election of directors or for any purpose.
ARTICLE 10.
Election Not to be Governed By Provisions of NRS 78.411 to 78.444.
10.1 The Corporation, pursuant to NRS 78.434, hereby elects not to be
governed by the provisions of NRS 78.411 to 78.444, inclusive.
ARTICLE 11.
Indemnification of Officers and Directors
11.1 The Corporation shall indemnify its directors, officers, employee,
fiduciaries and agents to the fullest extent permitted under the Nevada Revised
Statutes.
11.2 Every person who was or is a party or is threatened to be made a party
to or is involved in any action, suit or proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person for
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a director
or officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, shall be indemnified and held harmless
to the fullest extent legally permissible under the law of the State of Nevada
from time to time against all expenses, liability and loss (including attorney's
fees, judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. Such right of
indemnification shall be a contract right which may be enforced in any manner
desired by such person. Such right of indemnification shall not be exclusive of
any other right which such directors, officers or representatives may have or
hereafter acquire and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any
By-Law, agreement, vote of stockholders, provision of law or otherwise, as well
as their rights under this Article.
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11.3 Without limiting the application of the foregoing, the Board of
Directors may adopt By-Laws from time to time with respect to indemnification to
provide at all times the fullest indemnification permitted by the law of the
State of Nevada and may cause the corporation to purchase and maintain insurance
on behalf of any person who is or was a director or officer of the corporation
as a director of officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
11.4 The private property of the Stockholders, Directors and Officers shall
not be subject to the payment of corporate debts to any extent whatsoever.
11.5 No director, officer or shareholder shall have any personal liability
to the corporation or its stockholders for damages for breach of fiduciary duty
as a director or officer, except that this provision does not eliminate nor
limit in any way the liability of a director or officer for:
(a) Acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or
(b) The payment of dividends in violation of Nevada Revised Statutes
(N.R.S.) 78.300.
ARTICLE 12.
Purchase of Corporation's Shares
The corporation, by action of its directors, and without action by its
shareholders, may purchase its own shares in accordance with the provisions of
the Nevada Corporations Code. Such purchases may be made either in the open
marker or at a public or private sale, in such manner and amounts, from such
holder or holders of outstanding shares of the corporation and at such prices as
the Board of Directors shall from time to time determine.
ARTICLE 13.
Incorporators
The name and address of the Incorporator of the corporation is as follows:
Richard D. Surber
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
IN WITNESS WHEREOF, we have hereunto set our hands this 31st day of July,
2000, hereby declaring and certifying that the facts stated hereinabove are
true.
/s/ Richard D. Surber /s/ Kevin J. Schillo
------------------------------------ ---------------------------
Richard D. Surber, Incorporator and Director Kevin J. Schillo, Director
/s/ David Wolfson
-----------------------
David Wolfson, Director
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NOTARIZATION OF SIGNATURE OF A DIRECTOR AND THE INCORPORATOR
State of Utah )
)
County of Salt Lake )
On this 31st day of July, 2000 before me, Bonnie Tippets, a notary public,
personally appeared Richard D. Surber who is personally known to me to be the
person whose name is subscribed to this instrument and who has acknowledged that
he executed the same as a Director and the Incorporator of Kelly's Coffee Group,
Inc.
S ______________________________________
E Notary Public
A
L ______________________________________
My Commission Expires
NOTARIZATION OF SIGNATURE OF A DIRECTOR
State of Utah )
)
County of Salt Lake )
On this 31st day of July, 2000 before me, Bonnie Tippets, a notary public,
personally appeared David Wolfson who is personally known to me to be the person
whose name is subscribed to this instrument and who has acknowledged that he
executed the same as a Director of Kelly's Coffee Group, Inc.
S ______________________________________
E Notary Public
A
L ______________________________________
My Commission Expires
NOTARIZATION OF SIGNATURE OF A DIRECTOR
State of Utah )
)
County of Salt Lake )
On this 31st day of July, 2000 before me, Bonnie Tippets, a notary public,
personally appeared Kevin J.Schillo who is personally known to me to be the
person whose name is subscribed to this instrument and who has acknowledged that
he executed the same as a Director of Kelly's Coffee Group, Inc.
S ______________________________________
E Notary Public
A
L ______________________________________
My Commission Expires
36
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Appendix "C"
COLORADO BUSINESS CORPORATION ACT
7-113-201 - Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting, the notice of the
meeting shall be given to all shareholders, whether or not entitled to vote. The
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (1).
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to section
7-107-104, any written or oral solicitation of a shareholder to execute a
writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (2).
37