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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
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BEDFORD HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
NEW JERSEY 13-3901466
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
90 WEST STREET
NEW YORK, NEW YORK 10005 10005
(Address of Principal Executive Offices) (Zip Code)
(212) 385-3600
(Registrant's Telephone Number, Including Area Code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: (None)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, without par value
(Title of Class)
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TABLE OF CONTENTS
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PART I
Item 1 Description of Business. ..............................................................................3
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations. ...........................................................................................9
Item 3 Description of Property. .............................................................................15
Item 4 Security Ownership of Certain Beneficial Owners and Management. ......................................15
Item 5 Directors, Executive Officers, Promoters and Control Persons. ........................................16
Item 6 Executive Compensation................................................................................16
Item 7 Certain Relationships and. Related Transactions.......................................................17
Item 8 Description of Securities.............................................................................17
PART II
Item 1 Market Price of and Dividends on the Registrant's Common Equity and Other
Shareholder Matters. .................................................................................18
Item 2 Legal Proceedings. ...................................................................................18
Item 3 Changes In and Disagreements With Accountants.........................................................19
Item 4 Recent Sales of Unregistered Securities...............................................................19
Item 5 Indemnification of Directors and officers.............................................................19
PART F/S
Financial Statements............................................................................................1
PART III
Item 1 Index to Exhibits.....................................................................................20
Item 2 Description of Exhibits,..............................................................................20
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PART I
ITEM I DESCRIPTION OF BUSINESS
BUSINESS
Bedford Holdings, Inc., (the "Company") was established in 1996 as a
holding company for Allen & Pierce Securities, Inc., a broker-dealer ("Allen &
Pierce"), and with a view toward acquiring other businesses. Allen & Pierce was
established by Mr. Leon Zapoll, a former Russian citizen, to engage in a general
securities and commodities brokerage business, and has been in business since
1989. Allen & Pierce is registered as a securities broker-dealer with the U.S.
Securities and Exchange Commission and as an introducing broker with the U.S.
Commodities Futures Trading Corporation.
With the disintegration of the former USSR and the opening of the
Russian economy in the early 1990s the Company saw an opportunity to take
advantage of Mr. Zapoll's language and knowledge of the countries of the CIS to
develop a new source of brokerage business. Mr. Zapoll traveled extensively in
Russia and Uzbekistan in the early 1990s and was successful in developing a
significant number of new trading accounts which, over the next several years
yielded substantial commission revenues. With the turmoil in the Russian economy
of the mid to late 1990s Russian government severely restricted the ability of
Russian citizens to maintain securities and commodities trading accounts abroad.
These restrictions, coupled with substantial losses suffered by certain of the
Company's customers, resulted in a precipitous drop in the Company's commission
revenues. In 1997, seeking to replace the lost commission revenues, the Company
turned to commodities trading for its own account. However, in part because of
its limited capital, its trading activities generated losses rather than gains.
In late 1997 the Company began to develop a new business strategy designed to
take advantage of the contracts Mr. Zapoll had made through travels in the CIS .
Mr. Zapoll had found that in both Russia and Uzbekistan privatization was
creating a large number of private business enterprises with one thing in common
- -- a serious and immediate need for capital. The strategies which the Company
devised was to use the Company's "window to Wall Street" as a broker-dealer to
open access to the U.S. capital market for these companies.
In October, 1997 the Company entered into an agreement with ZAO AO
VENCO, a privately held Russian company owning a stake of approximately 60% in a
privately owned Russian oil company which holds development rights to five oil
fields in Siberia. Under this agreement, the Company was to issue 52% of its
common stock to the President of ZAO AO VENCO in exchange for the shares it was
acquiring. In addition, the Company was to raise at least $35 million dollars to
finance the construction of a pipeline connecting the oil fields to the main
pipeline running through Siberia. The Company was unable to raise the required
financing, in part due to unsettled conditions in Russia, and in 1998 the
parties terminated that agreement by mutual consent.
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The countries of the former USSR vary widely in both social
stability and governmental attitudes toward outside investment. The Company
has selected Uzbekistan as having the most promising combination of business
enterprises and government policies toward outside capital. Uzbekistan is the
third-largest of the former USSR, and a major manufacturing center for the
aircraft and automotive industries, as well as being rich in natural
resources. In early 1998 the Company began discussions with
O'zsanoatqurilishbank, a substantially privatized Uzbekistan bank ("SQ Bank")
with a view toward creating an opening to the U.S. capital markets for the
bank and its customers.
In March, 1999 the Company entered into an Exchange Agreement under
which it will offer to exchange shares representing 80% of its outstanding
common stock for the outstanding common shares of SQ Bank. If this exchange
offer is successfully concluded, SQ Bank will become a subsidiary of the
Company, and if all SQ Bank shareholders accept the offer the former
shareholders of SQ Bank will own 80% of the Company's stock. The exchange
offer is subject to a number of conditions, and there can be no assurance
that it will be successfully concluded.
The Exchange Agreement requires that for a period of 24 months after
the Closing, SQ Bank shall use Bedford as its exclusive broker for all of its
securities and commodities transactions (including foreign exchange and other
futures transactions) to be executed in the U.S. market, and shall recommend
Bedford to its customers to provide securities and commodities brokerage,
capital raising and other investment and financial services in the U.S. which
Bedford is capable of providing. Following the exchange, if it is successful,
the Company intends to offer, through Allen & Pierce Securities, a wide variety
of financial services to these customers. The services are expected to include
identifying potential U.S. joint venture partners for such customers, advice
concerning, and structuring of, investment in such companies, and general
brokerage services for the purchase of U.S. debt and equity securities and
commodities futures. It is expected that initially the Company's efforts will
focus primarily on exchange brokerage for SQ Bank, identifying joint venture
partners and raising investment capital in the private market. Insofar as access
to the public market is desired by these customers, the Company anticipates
introducing the customers to major and middle-level U.S. underwriters and
participating as a member of the syndicate selling group for such offerings.
The Exchange Agreement requires that during the initial 24 months after
closing of the exchange the Company must earn or raise not less than $30 million
in capital. In the event that the Company is not successful in raising this
minimum amount, the former shareholders of SQ Bank will be entitled to
additional shares of the Company's common stock in amounts depending upon the
shortfall. The maximum additional amount which such shareholders may receive (if
all of such shareholders accept the exchange off her) is the number of shares
required to bring their interest to 96% of the outstanding capital stock of the
Company.
The second prong of the Company's strategy is to take advantage of the
Company's unique characteristics to target certain niche markets in the
securities and commodities brokerage field in which the Company believes it has
a competitive advantage. The Company is in the process of installing an online
trading system. Unlike most smaller brokerage firms with an online presence, the
system being installed by the Company will provide for execution of both
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securities and commodities trades. The Web page will appear in four languages -
English, French, Russian and either German or Chinese. The Company believes that
in many cases high net worth individuals whose first language is not English,
and companies owned by such individuals, are more comfortable dealing in their
native language in financial matters and will find the Company's system
attractive. Initially the system will provide for transmission over the Internet
of customer orders to the Company's offices and immediate verification of the
customer's margin status. Thereafter, the actual trade will be executed by an
Allen & Pierce broker through telephone connection to the appropriate stock
exchange, commodities exchange or other market via telephone to the floor broker
or market maker. This system will allow direct supervision of the trades by a
responsible individual during the initial development of the system. It is
anticipated that had a later date execution will be fully automated.
COMPETITION
Securities Business
There is significant competition in all aspects of the securities
business. While the Company's arrangement for exclusivity with SQ Bank will
provide some competitive advantage over the near term, it must be expected that
as the Bank's customers gain additional exposure to the financial markets the
Company will increasingly be competing for the services the Company provides
directly with other domestic and foreign securities firms, nearly all of which
have greater capital, financial and other resources than the Company. In
addition to competition from firms currently in the securities business, there
has been increasing competition from other sources, such as commercial banks and
investment boutiques. As a result of pending legislative and regulatory
initiatives in the U.S. to remove or relieve certain restrictions on commercial
banks, it is anticipated that competition in some markets currently dominated by
investment banks and securities firms may increase in the near future. Such
competition could also affect the Company's ability to attract and retain highly
skilled individuals to conduct its businesses. The principal competitive factors
influencing the Company's business are expected to be its existing client
relationships, and its market capabilities. The Company's ability to compete
effectively in securities brokerage and investment banking activities will also
be influenced by the adequacy of its capital levels.
Banking Business in Uzbekistan
SQ Bank is the second largest Uzbek domestic bank operating in
Uzbekistan. While the Company's knowledge of the competitive situation in the
banking industry in Uzbekistan is limited, the Company believes that the
industry is highly competitive and likely to become more so. In addition, major
money-center banks have historically been relatively quick in responding to
business opportunities abroad, and the Company's expectation is that SQ Bank
will face additional competition from such banks in the near future.
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EMPLOYEES
At January 31, 1999, the Company had 2 employees, Mr. Zapoll and Mr.
Samila. See Item 5. A condition to the effectiveness of the Exchange Offer is
that the Company have entered into employment contract reasonably satisfactory
to it with Mr. Samila. It is expected that such employment contracts will
provide protection against dismissal other than for cause for a term of 10 years
after the closing of the Exchange Offer. If the exchange offer is successful,
the former shareholders of SQ Bank will be entitled to elect a majority of the
directors of the Company, and it may be anticipated that they will wish to add
additional employees. However, the Company has no information as to their
intentions in that regard.
REGULATION
The Company's business and the securities industry in general are
subject to extensive regulation in the U.S. at both the Federal and state level,
as well as by industry Self Regulatory Organizations ("SROs"). A number of
Federal regulatory agencies are charged with safeguarding the integrity of the
securities and other financial markets and with protecting the interests of
customers participating in those markets. The Securities and Exchange Commission
("Commission") is the Federal agency that is primarily responsible for the
regulation of broker-dealers and investment advisers doing business in the U.S.,
and the Commodities Futures Trading Corporation ("CFTC") is primarily
responsible for the regulation of the futures business. In addition, the
Department of the Treasury and the Municipal Securities Rulemaking Board have
the authority to promulgate regulations relating to U.S. government and agency
securities and to municipal securities, respectively, and the Board of Governors
of the Federal Reserve System promulgates regulations applicable to securities
credit transactions involving broker-dealers and certain other U.S.
institutions. Broker-dealers and investment advisers are subject to registration
and regulation by state securities regulators in those states in which they
conduct business. Industry SROs, each of which has authority over the firms that
are its members, include the NASD, the NYSE and other securities exchanges, the
National Futures Association (the "NFA") and the commodities exchanges.
Allen & Pierce is registered as a broker-dealer with the Commission and
is a member of, and subject to regulation by, a number of securities industry
SROs, including the NASD. Allen & Pierce is also registered as a broker-dealer
in New York, and as an introducing broker with the CFTC.
As a result of registration and SRO memberships, the U.S.
Broker-Dealers are subject to overlapping schemes of regulation which cover all
aspects of their securities business. Such regulations cover matters including
capital requirements, the use and safekeeping of customers' funds and
securities, record keeping and reporting requirements, supervisory and
organizational procedures intended to assure compliance with securities laws and
rules of the SROs and to prevent the improper trading on "material nonpublic"
information, employee-related matters, limitations on extensions of credit in
securities transactions, and clearance and settlement procedures. A particular
focus of the applicable regulations concerns the relationship between
broker-dealers and their customers. As a result, the U.S. Broker-Dealers in some
instances may
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be required to make "suitability" determinations as to certain customer
transactions, are limited in the amounts that they may charge customers, cannot
trade ahead of their customers and must make certain required disclosures to
their customers.
Allen & Pierce Securities, as a registered introducing broker, is
subject to the capital and other requirements of the CFTC under the Commodity
Exchange Act. These requirements include the provision of certain disclosure
documents, prohibitions against trading ahead of customers and other fraudulent
trading practices, provisions as to the handling of customer funds and reporting
and record keeping requirements.
U.S. Broker-Dealers are also subject to "Risk Assessment Rules"
imposed by the Commission and by the CFTC. These rules require, among other
things, that certain broker-dealers and introducing brokers maintain and
preserve certain information, describe risk management policies and
procedures and report on the financial condition of certain affiliates whose
financial and securities activities are reasonably likely to have a material
impact on the financial and operational condition of the broker-dealers or
introducing brokers. Affiliates of the U.S. Broker-Dealers and the activities
conducted by such affiliates may not be subject to regulation by the
Commission or the CFTC. However, the possibility exists that, on the basis of
the information that they obtain from the Risk Assessment Rules, the
Commission or CFTC could seek legislative or regulatory changes in order to
expand their authority over the Company's unregulated activities either
directly or through their existing authority over the Company's regulated
subsidiary.
Additional legislation and regulations, including those relating to the
activities of affiliates of broker-dealers, changes in rules promulgated by the
Commission, the CFTC or other U.S. or foreign governmental regulatory
authorities and SROs or changes in the interpretation or enforcement of existing
laws and rules may adversely affect the manner of operation and profitability of
the Company. Among other things, the SEC has recently become active in the
enforcement of its regulations in the area of online trading activities in an
effort to curb various abuses which have occurred in that area. It may be
anticipated that such enforcement will continue or increase, and that additional
regulations may be adopted, some of which could adversely affect the Company's
plans to move into this area
The Company's businesses may be materially affected not only by
regulations applicable to it as a financial market intermediary, but also by
regulations of general application. For example, the volume of the Company's
proposed investment banking businesses in any year could be affected by, among
other things, existing and proposed tax legislation, antitrust policy and other
governmental regulations and policies (including the interest rate policies of
the Federal Reserve Board) and changes in interpretation or enforcement of
existing laws and rules that affect the business and financial communities.
NET CAPITAL REQUIREMENTS
As a broker-dealers registered with the Commission, Allen & Pierce
Securities is subject to the capital requirements of the Commission. These
capital requirements specify minimum
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levels of capital, computed in accordance with regulatory requirements ("net
capital"), that the U.S. Broker-Dealers are required to maintain and also limit
the amount of leverage that the U.S. Broker-Dealers are able to obtain in their
businesses. As an introducing broker, Allen & Pierce is also subject to the
capital requirements of the CFTC.
Under the method selected by Allen & Pierce for computing its net
capital requirements, it is required by the Commission to maintain regulatory
net capital, computed in accordance with the Commission's regulations, equal to
the lesser of $100,00 or 6 2/3% of Aggregate Indebtedness calculated in
accordance with Commission regulations. Further, under CFTC and CBOT capital
regulations, Allen & Pierce Securities must maintain capital in an amount equal
to at least the lesser of $30,000 or $3,000 per associated person.
"Net capital" is essentially defined as net worth (assets minus
liabilities, as determined under generally accepted accounting principles), plus
qualifying subordinated borrowings, less the value of all of a broker-dealer's
assets that are not readily convertible into cash (such as goodwill, furniture,
prepaid expenses, exchange seats and unsecured receivables), and further reduced
by certain percentages (commonly called "haircuts") of the market value of a
broker-dealer's positions in securities and other financial instruments.
A failure by a U.S. Broker-Dealer to maintain its minimum required
capital would require it to cease executing customer transactions until it came
back into capital compliance, and could cause it to lose its right to
registration with the Commission or CFTC, or require its liquidation. Further,
the decline in a U.S. Broker-Dealer's net capital below certain "early warning
levels," even though above minimum capital requirements, could cause material
adverse consequences to the firm. For example, the Commission's capital
regulations prohibit payment of dividends, redemption of stock and the
prepayment of subordinated indebtedness if a broker-dealer's net capital
thereafter would be less than 120% of the minimum dollar amount required and
prohibit principal payments in respect of subordinated indebtedness if a
broker-dealer's net capital thereafter would be less than 120% of the minimum
dollar amount required or $36,000 or $4,500 per associated person.
The Commission's capital rules also (i) require that the U.S.
Broker-Dealers notify the Commission and, the CFTC, in writing, two business
days prior to making withdrawals or other distributions of equity capital or
lending money to certain related persons, if those withdrawals would exceed, in
any 30 day period, 30% of the broker-dealer's excess net capital and that they
provide such notice within two business days after any such withdrawal or loan
that would exceed, in any 30 day period, 20% of the broker-dealer's excess net
capital, (ii) prohibit a U.S. Broker-Dealer from withdrawing or otherwise
distributing equity capital or making related party loans if after such
distribution or loan, the U.S. Broker-Dealer has net capital of less than 120%
of the minimum dollar amount required and in certain other circumstances, and
(iii) provide that the Commission may, by order, prohibit withdrawals of capital
from the U.S. Broker-Dealers for a period of up to 20 business days, if the
withdrawals would exceed, in any 30 day period, 30% of the broker-dealer's
excess net capital and the Commission believes such withdrawals would be
detrimental to the financial integrity of the firm or would unduly jeopardize
the broker-dealer's ability to pay its customer claims or other liabilities.
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Compliance with regulatory capital requirements could limit those
operations of Allen & Pierce that require the intensive use of capital, such as
trading activities, and the financing of customer account balances, and also
could restrict the Company's ability to withdraw capital from Allen & Pierce,
which in turn could limit the Company's ability to pay dividends, pay interest,
repay debt, and redeem or purchase shares of its outstanding capital stock.
The Company believes that at all times Allen & Pierce has been in
compliance in all material respects with the applicable minimum capital rules of
the Commission, and the CFTC except for one instance in 1992 when Allen & Pierce
was assessed a modest penalty by the NASD for violation of its net capital
rules. As of January 31, 1999, Allen & Pierce Securities was required to
maintain minimum "net capital," in accordance with Commission and CFTC rules, of
approximately $100,000 and had total net capital of $257,156.
YEAR 2000 DISCLOSURE
The Company in its securities and commodities transactions acts as
an introducing broker. Actual transaction records are prepared by its
clearing broker. The Company is seeking assurance from its clearing brokers
that Year 2000 issues will not have any serious impact on the functions they
are performing for the Company. The Company's brokerage operations are also
dependent upon continuing quotation information provided by E.D.F. Man
International, and on the availability of financial information provided by
Bloomberg L.P. The Company is similarly seeking appropriate assurances from
these vendors. Since the Company is entirely dependent on outside vendors
with respect to the major portions of its operations, there can be no
assurance that the necessary modifications and conversions by the vendors
will be adequate or completely thorough, which could have a material adverse
effect on its results of operations. The total cost to the Company associated
with the required modifications and conversions are not expected to be
material to the Company's results of operations and financial position and
are being expensed as incurred.
ITEM 2 - MANAGEMENT'S DISCUSSION OF ANALYSTS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties, and the
Company's actual results could differ materially from those forward-looking
statements. The following discussion regarding the financial statements of the
Company should be read in conjunction with the financial statements and notes
thereto.
OVERVIEW
The Company is a holding company for Allen & Pierce, a securities and
commodities broker which was established in 1989 by Mr. Leon Zapoll, a former
Russian citizen, and Mr. Robert Samila, to engage in a general securities and
commodities brokerage business. For its initial two years, Allen & Pierce
carried out a general securities and commodities brokerage
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business. With the disintegration of the former USSR and the opening of the
Russian economy in the early 1990s the Company saw an opportunity to take
advantage of Mr. Zapoll's language and knowledge of the CIS to develop a new
source of brokerage business. Mr. Zapoll traveled extensively in Russia and
Uzbekistan in the early 1990s and was successful in developing a significant
number of new trading accounts which, over the next several years yielded
substantial commission revenues. With the turmoil in the Russian economy of the
mid to late 1990s Russian government prohibited Russian citizens from
maintaining securities and commodities trading accounts abroad. This
restriction, coupled with substantial losses suffered by certain of the
Company's customers, resulted in a precipitous drop in the Company's commission
revenues. In 1997, seeking to replace the lost commission revenues, the Company
turned to commodities trading for its own account. However, in part because of
its limited capital, its trading activities generated losses rather than gains.
In late 1997 the Company began to develop a new business strategy designed to
take advantage of the contracts Mr. Zapoll had made through his earlier travels
in the CIS. It recently signed an Agreement and Plan of Reorganization with SQ
Bank, a leading commercial bank in Uzbekistan, under which it proposes to make
an exchange offer for 100% of SQ Bank's outstanding common stock.
RESULTS OF OPERATIONS
Revenues declined from $120,580 for the year ended December 31, 1997 to
($219,011) for the fiscal year ended December 31, 1998. The primary factors
contributing to this decline were the reduction in commission revenues and
interest income. The Company's commission revenues declined from $348,480 in
1997 to $0 in 1998. This decline was due to the complete absence in 1998 of any
brokerage transactions as a result primarily of the cessation of exchange
futures and other commodities trading in the U.S. by its customers in the states
of the former USSR. Interest income declined from $26,681 in 1997 to $1,205 in
1998 because market losses reduced the amount of funds on deposit. In late 1997
the Company, in an effort to offset the reduced commission revenues, began
proprietary trading for its own account. It incurred losses in such trading of
$254,581 in 1997 and $220,216 in 1998, a decrease of 13.5%. As of the end of
1998 the Company had ceased proprietary trading for its own account, and does
not contemplate any such trading in the future.
Expenses increased by 6% from $362,907 to $384,846 for the fiscal years ended
December 31, and 1997 and 1998, respectively. The increase was due to a 46%
increase in salary expense, as the Company's President had taken no salary in
1997 and took a $10,200 salary in 1998, and $9,273 in interest expense
incurred for the fiscal year ended December 31, 1998 as a result of the
short-term borrowings referred to below.
LIQUIDITY AND CAPITAL RESOURCES
The increase in total assets from $296,168 as of December 31, 1997 to $1,879,229
as of December 31, 1998 reflects primarily borrowed funds. The elimination of
commission revenues commencing in mid-1997 severely impacted the Company's
liquidity. In order to sustain its operations while the Company began
implementing its new business strategy, the Company found it necessary to resort
to short-term borrowing. During the period from April, 1998 through
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January 31, 1999, the Company issued unsecured promissory notes in an
aggregate principal amount of approximately $2.2 million to 6 accredited
investors, including one corporation and 5 individuals. The terms of these
notes ranged from 1 month through 1 year and the notes bore interest at prime
except for $25,000 in principal amount which bore interest at 20%. As of
December 31, 1998 the aggregate amount of such notes outstanding was
$2,191,531. The increase in the Company's cash position from $40,982 as of
December 31, 1997 to $1,760,372 was due entirely to such borrowing. The 66%
decline in receivables from brokers (representing cash held by the Company's
clearing broker and one broker abroad) was the result of the decline in the
Company's commission business.
As of December 31, 1998 the Company's liquidity position was
precarious. Its ability to continue operations is almost entirely dependent upon
completing the proposed exchange with shareholders of SQ Bank. Any future
profits of its Allen & Pierce subsidiary will depend in substantial part on
generating additional revenues through future commission business and financial
services fees resulting from proposed services to be performed for SQ Bank and
customers of the bank referred to the Company by it. While SQ Bank is required
under the terms of the Agreement and Plan of Reorganization to use Allen &
Pierce Securities, Inc. as its exclusive broker or for U.S. transactions during
the two-year period following the closing, and to recommend Allen & Pierce
Securities, Inc. to its customers for services which Allen & Pierce can provide,
there can be no assurance that the proposed exchange offer will be completed, as
to the amount of such services which will be referred to the Company or the
revenues which may result from such referrals. In the absence of substantial
additional revenues, the Company's ability to continue operations is dependent
upon the willingness of its short-term lenders to continue rolling over their
loans to the Company. There can be no assurance that these lenders will continue
to renew their loans. If any substantial portion of such lenders were to require
payment in full of such loans the Company would not be a position to maintain
the net capital requirements of Allen & Pierce Securities, Inc. and would be
forced to terminate its operations as a broker-dealer, which would severely
impact its ability to carry out its plan of operations.
IMPACT OF PROPOSED EXCHANGE OFFER
The proposed exchange offer, if completed, would have a major impact on the
financial position and results of operations of the Company. The following pro
forma financial information has been prepared by the Company based on the
audited consolidated financial statements of SQ Bank for the year ended December
31, 1997, the latest year for which such financial statements are available for
SQ Bank, and on the audited financial statements of the Company for that same
period. Such financial information gives effect to completion of the proposed
exchange offer as if it had been completed as of January 1, 1997, and on the
assumption that all shareholders of SQ Bank will accept the exchange.
The pro forma information set forth below should be viewed with considerable
caution for the following reasons, among others:
1. While the financial statements of SQ Bank and the Company were
audited by KPMG - Uzbekistan Limited and Donahue Associates, Inc.,
respectively, the pro forma information has not been audited or reviewed by
any accounting firm.
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2. The Company does not have, and will not have until after completion
of the exchange offer, access to the financial records of SQ Bank for the
fiscal year presented or for any subsequent period of time, and is relying
solely upon the published financial statements of SQ Bank in preparing such
information.
3. The financial statements of SQ Bank on which such pro forma
information is based were based on international accounting standards. Such
accounting standards may vary in certain respects from generally accepted
accounting principles which would be used by a U.S. Company.
4. The opinion of KPMG - Uzbekistan Limited accompanying the financial
statements of SQ Bank for the applicable year is subject to several
qualifications, including the failure to apply International Auditing
Standard No. 29 "Financial Reporting in Hyper-inflationary Economies" and
failure to make necessary disclosures about fair market values of each class
of financial assets and financial liabilities, as required by International
Accounting Standard No. 32 "Financial Instruments: Disclosure and
Presentation." The failure to comply with International Accounting Standard
No. 32 is understood to be due to the requirement of the bank to maintain
confidentiality regarding the terms of certain transactions. The failure to
apply International Auditing Standard No. 29 may be particularly significant
in view of the age of the financial information presented. Subject to the
foregoing, management believes that such pro forma financial information
presents fairly the information purported to be shown thereby.
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BEDFORD HOLDINGS INC. (PRO-FORMA)
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1997
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<CAPTION>
ASSETS Bedford SQ Bank Adjustments Consolidated
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Cash $40,982 $5,791,493 $5,832,475
Due from the Central Bank 68,965,087 68,965,087
Deposits with Banks (net of provisions)
53,343,358 53,343,358
Marketable securities 17,324,772 17,324,772
Loans to Customers (net of provisions)
212,920,918 212,920,918
Other Investments (net of provisions)
195,295 2,766,421 2,961,716
Fixed Assets (net of accumulated
depreciation) 52,144 16,781,951 16,834,095
Other Assets 7,747 9,663,540 9,671,287
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Total Assets $296,168 $387,557,540 $387,853,708
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LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposits payable $174,481,776 $174,481,7762
Deposits from banks 8,593,489 8,593,489
Due to the Central Bank 136,488,874 136,488,874
Due to the Ministry of Finance 19,656,667 19,656,667
Other liabilities $12,518 7,357,989 7,370,507
Common Stock (2) 21,200 10,099,788 (10,014,771) 106,217
Treasury Stock (1) (6,000) 6,000 0
Contributed Capital in excess of stated
value (1) (2) 969,488 110,008,771 10,978,259
Retained Earnings (701,038) 30,878,957 30,177,919
-------- ------------ ----------- ------------
Total Liabilities and Stockholders'
Equity $296,168 $387,557,540 $0 $387,853,709
-------- ------------ ----------- ------------
-------- ------------ ----------- ------------
</TABLE>
13
<PAGE>
BEDFORD HOLDINGS INC. (PRO-FORMA)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDING DECEMBER 31, 1997
<TABLE>
<CAPTION>
Bedford SQ Bank Adjustments Consolidated
<S> <C> <C> <C> <C>
Revenues:
Banking fees 32,529,325 $32,529,325
Interest income $26,681 25,052,164 25,078,845
Other income 93,898 10,214,020 10,307,919
--------- ---------- ----------
Total Revenues 120,579 67,795,510 67,916,089
Operating expenses:
General administrative expense
337,567 18,664,051 19,001,618
Interest expense 3,240 13,022,926 13,026,167
Provisions for bad debt expense
1,577,535 1,577,535
Commissions and fees 2,443,483 2,443,483
--------- ---------- ----------
Total operating expenses 340,807 35,707,996 36,048,803
Net income before tax provision and
extraordinary item (220,228) 32,087,514 31,867,286
Provision for income taxes
(8,940,264) (8,940,264)
Write off of unprofitable
branches (7,307,122) (7,307,122)
--------- ---------- ----------
Net income ($220,228) $15,840,127 $15,619,899
--------- ---------- ----------
--------- ---------- ----------
Earnings per common share:
Basic (0.01) 20.17 0.15
Diluted (0.01) 20.17 0.15
Weighted Average of common shares:
Basic 21,194,000 785,244 106,217,500
Diluted 21,194,000 785,244 106,217,500
</TABLE>
<TABLE>
Pro-forma Adjustments for Consolidation:
<S> <C> <C> <C> <C>
1 Debit Contributed Capital $6,000
1 Credit Treasury Stock $6,000
</TABLE>
14
<PAGE>
To record retirement of Bedford Holdings treasury stock up on consolidation
<TABLE>
<S> <C> <C> <C> <C>
2 Debit Common stock $10,014,771
2 Credit Contributing Capital $10,014,771
</TABLE>
To record conversion of SQ Bank shares into shares of Bedford Holdings. The
pro-forma consolidated entity will have 150,000,000 common shares authorized and
106,217,500 issued and outstanding with a stated value of $.001 per share.
ITEM 3 - DESCRIPTION OF PROPERTY
The Company's offices are presently located at 90 West Street, New
York, New York and occupy approximately 1,800 square feet under a lease
currently extending through 1999. The Company believes this space will be
sufficient for its operations for the foreseeable future. The Company's
requirements are limited to general-purpose office space, and the Company
believes that at the present time such space is readily available in downtown
New York.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 11, 1999, certain
information with respect to the Company's equity securities believed by the
Company to be owned of record or beneficially by (i) each Director of the
Company; (ii) each person who owns beneficially more than 5% of each class of
the Company's outstanding equity securities; and (iii) all Directors and
Executive Officers as a group.
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Owner Number of % of Class
- --------------- ------------------------------------- --------- ----------
Shares
------
<S> <C> <C> <C>
Common Stock Leon Zapoll 20 million 94.1%
36 Wescott St.
Old Tappan, NJ 07675
Common Stock Robert Samila - -
617 Salem Road
Union, NJ 07083
</TABLE>
The beneficial owners of securities listed above have sole investment
and voting power with respect to such shares. Beneficial ownership is determined
in accordance with the rules of the Commission and generally includes voting or
investment power with respect to securities. Shares of stock subject to options
or warrants currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person holding such
options or warrants, but are not deemed outstanding for purposes of computing
the percentage of any other person.
15
<PAGE>
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal offices and
positions with the Company held by each person and the date such person became a
director or executive officer of the Company. The executive officers of the
Company are elected annually by the Board of Directors. The directors serve one
year terms and until their successors are elected. The executive officers serve
terms of one year or until their death, resignation or removal by the Board of
Directors.
<TABLE>
<CAPTION>
Name Age Positions Date became director or
executive officer
<S> <C> <C>
Leon Zapoll 48 President July 1996
Robert Samila 57 Chief Financial Officer, Secretary and July 1996
Treasurer
</TABLE>
There are no family relationships between any of the directors and
executive officers. There was no arrangement or understanding between any
executive officer and any other person pursuant to which any person was selected
as an executive officer.
LEON ZAPOLL. Mr. Zapoll has been the President of the Company or its
predecessor since 1989. He is licensed by the Commodities Futures Trading
Corporation as a commodities principal and an associated person.
ROBERT SAMILA. Mr. Samila has been the Chief Financial Officer of
the Company or its predecessor since 1989. Prior to that time he was employed
in various capacities by a number of firms in the securities industry, and as
an examiner for the National Association of Securities Dealers, Inc. He is
licensed by the Securities and Exchange Commission as a general securities
principal, financial operations principal, registered options principal, and
municipal bond principal, and by the Commodities Futures Trading Corporation
as a supervising sole principal, associated person and commodities principal.
He is registered as a Branch Manager with the New York Stock Exchange and was
in the past an Allied Member of the American Stock Exchange. He is currently
licensed as a salesperson in the state of New York and as in the past been
licensed in a number of other states. He holds a bachelor's degree in
Business Administration from Seton Hall University.
ITEM 6 EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information
for services rendered in all capacities during each of the prior three (3)
fiscal years. No bonuses or stock options were granted and no additional
compensation was paid or deferred.
16
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
POSITION YEAR SALARY
<S> <C> <C>
Leon Zapoll, President 1998 10,200
1997 -
1996 -*
Robert Samila Chief Financial 1998 $22,100
Officer, Treasurer and
Secretary
1997 $22,100
1996 $22,100
</TABLE>
* Prior to August, 1996, Allen & Pierce Securities, Inc. operated as an S
Corporation; Mr. Zapoll was its sole shareholder. It showed a loss for the 1996
partial year.
COMPENSATION OF DIRECTORS
No Director receives or has received any compensation from the Company
for service as a member of the Board of Directors.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
ITEM 8 - DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Certificate of Incorporation authorizes the issuance
of 40 million shares of Common Stock, without par value, of which 27,243,000
shares were issued and outstanding as of February 28, 1999. Holders of shares
of Common Stock are entitled to one vote for each, share on all matters to be
voted on by the shareholders. Holders of Common Stock have no cumulative
voting rights. Holders of shares of Common Stock are entitled to share
ratably in dividends, if any, as may be declared, from time to time by the
Board of Directors in its discretion, from funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company, the
holders of shares of Common Stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities. Holders of Common Stock
have no preemptive rights to purchase the Company's common stock. There are
no conversion rights or redemption or sinking fund provisions with respect to
the common stock. All of the outstanding shares of Common Stock are fully
paid and non-assessable.
TRANSFER AGENT
The Company's transfer agent is the American Securities Transfer Inc.
division of Wells Fargo.
17
<PAGE>
PART II
ITEM I - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
MARKET INFORMATTON
The Company's Common Stock is quoted under the symbol "BFHI" on the
NASDAQ Electronic Bulletin Board. The following table sets forth the high and
low bid prices for shares of the Company Common Stock for the periods noted,
as reported by the NASD. NASDAQ Bulletin Board. Quotations reflect inter
dealer prices, without retail markup, mark down or commission and may not
represent actual transactions. <TABLE><CAPTION>
BID PRICES
YEAR PERIOD HIGH LOW
<S> <C> <C> <C>
1997 Third Quarter $0.825 $0.25
Fourth Quarter $1.125 $0.60
1998 First Quarter $0.625 $0.625
Second Quarter $1.125 $0.625
Third Quarter N/A* N/A*
Fourth Quarter $2.875 $2.25
</TABLE>
*Bid prices are not available for the third quarter of 1998.
The Company's securities were not publicly traded prior to August,
1996. As of March 11, 1999 the reported bid price for the Company's common stock
was $0.9375 per share.
SHAREHOLDERS
As of February 28, 1999, the Company had 27,243,500 shares of Common
Stock outstanding held by 10 shareholders of record.
DIVIDENDS
The Company has not paid cash dividends on its Common Stock in the past
and does not anticipate doing so in the foreseeable future.
ITEM 2 - LEGAL PROCEEDINGS
The Company is not currently involved in any litigation.
18
<PAGE>
ITEM 3 CHANGES IN AND DISAGREEMENTS WTTH ACCOUNTANTS
Effective July, 1996 Donahue Associates, Inc., Certified Public
Accountants, were engaged by the Company as their principal accountant to audit
the Company's financial statements. There have been no changes in accountants or
disagreements of the type required to be reported under this Item 3 between the
Company and its independent auditors since their date of engagement, nor during
the Company's two most recent fiscal years or any later interim period.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
In July of 1996, the Company completed an offering of 1.2 million
shares of its Common Stock at a price of $0.25 per share to a total of 2
accredited investors and 17 non-accredited investors. Aggregate proceeds of that
offering were $300,000. The sales were made in reliance on the Commission's Rule
504 under the Securities Act of 1933, as amended.
During the period from April, 1998 through January 31, 1999, the
Company issued unsecured promissory notes in an aggregate principal amount of
$2,191,531 to 6 accredited investors, including 1 corporation and 5 individuals.
The terms of these notes ranged from 1 month through 1 year and the notes bore
interest at prime. These notes were issued in reliance on the exemption of
Section 4(2) of the Securities Act of 1933, as amended. The Company also issued
a similar unsecured promissory note in the amount of $25,000 and bearing
interest at 20% to one individual who, it later determined, was not an
accredited investor. The Company repaid that loan with interest immediately upon
determining that the investor was not accredited.
In 1997, the Company issued 6 million shares of its common stock to
SQ Bank as a good faith deposit based on the assumption that the two
companies would merge. Since the parties subsequently negotiated a different
arrangement, those shares were canceled by mutual agreement in March, 1999.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation laws of the State of New jersey and the Company's
Certificate of Incorporation provide for indemnification of the Company's
Directors for liabilities and expenses that they may incur in such capacities.
In general, Directors and Officers are indemnified with respect to actions taken
in good faith in a manner reasonably believed to be in, or not opposed to, the
bast interests of the Company, and with respect to any criminal action or
proceeding, actions that the indemnitee had no reasonable cause to believe were
unlawful. The personal liability of the Directors is also limited as provided in
the Company's Certificate of Incorporation.
PART F/S
FINANCIAL STATEMENTS
The Financial Statements required by this Item are included at the end
of this report beginning on Page F1.
19
<PAGE>
BEDFORD HOLDINGS, INC..
CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years ended
December 31, 1998 and 1997 BEDFORD
HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors..................................................................................1
Consolidated Financial Statements of Bedford Holdings, Inc.:
Consolidated Balance Sheet as of December 31, 1998.....................................................2
Consolidated Statements of Operations for the years ended December 31, 1998 and 1997
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended
December 31, 1998 and 1997.............................................................................3
Consolidated Statements of Cash flows for the years ended December 31, 1998 and 1997...................4
Notes to Consolidated Financial Statements.............................................................5
</TABLE>
F-1
<PAGE>
DONAHUE ASSOCIATES, INC.
CERTIFIED PUBLIC ACCOUNTANTS
353 Main Street, Chatham, NJ. 07928 (973) 635-2111
INDEPENDENT AUDITORS REPORT
The Shareholders Bedford Holdings Inc.
We have audited the accompanying balance sheets of Bedford Holdings
Inc. as of December 31, 1998 and December 31, 1997 and the related statements
of income and change in owners' equity, and cash flows for the fiscal years
ended December 31, 1998 and December 31, 1997. These financial statements are
the responsibility of management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements presented are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bedford Holdings
Inc. as of December 31, 1998 and December 31, 1997 and the results of
operations and cash flows for the fiscal years ended December 31, 1998 and
December 31, 1997 in conformity with generally accepted accounting principles
consistently applied.
Brian Donahue
Chatham, NJ.
March 7, 1999
F-2
<PAGE>
BEDFORD HOLDINGS INC.
STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31,1998 AND
DECEMBER 31, 1997 (Consolidated)
<TABLE>
<CAPTION>
1998 1997
ASSETS
<S> <C> <C>
Cash $1,760,372 $40,982
Receivables from Brokers 66,796 195,295
Fixed Assets (net of accumulated depreciation of $62,899)
38,010 52,144
Other Assets 14,051 7,747
-------------- ------------
Total Assets $1,879,229 $296,168
-------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $8,405 S12,518
Short term loans payable 2,191,531 0
Common Stock, nonpar value, 40,000,000 shares authorized 21,200: 21,200
27,250,000 shares issued and 27,243,500 outstanding stated value
$.001 per share, including 6,500 shares of treasury stock
Treasury Stock (6,500) (6,000)
Contributed Capital in excess of stated value 969,488 969,488
Retained Deficit (1,304,895) (701,038)
-------------- ------------
Total Liabilities and Shareholders' Equity $1,879,229 $296,168
-------------- ------------
</TABLE>
Please see accompanying notes to these financial statements.
F-3
<PAGE>
BEDFORD HOLDINGS INC.
STATEMENT OF OPERATIONS FOR THE YEARS ENDING DECEMBER 31,1998
AND DECEMBER 31, 1997 (Consolidated)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C> <C>
Revenues
Commissions $0 $348,480
Interest 1,205 26,681
Trading Loss (220,216) (254,581)
----------------- -----------------------
Total Revenues ($219,011) $120,580
Expenses:
Salaries 32,300 22,100
General administrative 329,843 327,377
Interest expense 9,273 0
Depreciation 13,430 13,430
----------------- -----------------------
Total expenses 384,846 362,907
----------------- -----------------------
Net Loss ($603,857) ($242,327)
----------------- -----------------------
Earnings per common share:
Basic: ($0.02 ($0.01)
Diluted ($0.02 ($0.01)
Weighted Average of common shares:
Basic 27,243,500 27,244,000
Diluted 27,243,500 27,244,000
</TABLE>
Please see accompanying notes to these financial statements.
F-4
<PAGE>
BEDFORD HOLDINGS INC.
STATEMENT OF CASH FLOWS FOR THE YEARS ENDING DECEMBER 31,1998
AND DECEMBER 31, 1997 (Consolidated)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from Operating Activities:
Net Income ($603,857) ($242,328)
Adjustments to reconcile net income to cash provided by operating
activities; add back depreciation expense 13,341 13,341
------------------- -------------------
Net cash used by operating activities (590,516) (228,987)
Cash flows from operating activities:
Decrease in broker receivable 128,499 82,631
Decrease in accounts payable (4,113) 621
Increase in other assets (6,304) 3,421
Increase in short term loans payable 2,191,531 92
------------------- -------------------
Net cash provided by operating activities 2,309,613 86,765
Cash flows from financing activities:
Write off of residual fixed asset 793
Purchase of treasury stock (See Note 2) (500) (6,000)
------------------- -------------------
Net cash (used) provided by financing activities 293 (6,000)
Net increase (decrease) in cash 1,719,390 (148,222)
Cash Balance and Beginning of Year 40,982 189,204
------------------- -------------------
Cash Balance at End of Year $1,760,372 40,982
------------------- -------------------
------------------- -------------------
</TABLE>
Please see accompanying notes to these financial statements.
F-5
<PAGE>
BEDFORD HOLDINGS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDING DECEMBER 31, 1998 AND DECEMBER 31, 1997
(Consolidated)
<TABLE>
<CAPTION>
Common Contributed Treasury Retained Total
Stock Capital Stock Earnings Capital
-------- ----------- ------------ ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $21,200 $969,488 ($0 ($458,710) $531,978
Purchase of Treasury Stock (See (6,000) (6,000)
Note 2)
Net loss (242,328) (242,328)
-------- ----------- ------------ ----------------- ---------------
Balance at December 31, 1997
$21,200 $969,488 ($6,000) ($701,038) ($283,650)
-------- ----------- ------------ ----------------- ---------------
-------- ----------- ------------ ----------------- ---------------
Purchase of Treasury Stock (See (500) (500)
Note 2)
Net loss (603,857) (603,857
-------- ----------- ------------ ----------------- ---------------
Balance at December 31, 1998
$21,200 $969,488 ($6,500) ($1,304,895) ($320,707)
-------- ----------- ------------ ----------------- ---------------
-------- ----------- ------------ ----------------- ---------------
</TABLE>
Please see accompanying notes to these financial statements.
F-6
<PAGE>
BEDFORD HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31,1998 AND
DECEMBER 31, 1997
NOTE 1: ORGANIZATION
Bedford Holdings, Inc. (the Company) is a New Jersey State Corporation
formed in July, 1996 for the purpose of purchasing and holding the common stock
of various companies for investment.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICTFS
Principles of Consolidation. The consolidated financial statements
include the accounts of Bedford Holdings Inc. and its wholly owned subsidiary,
Allen & Pierce Securities Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Furniture and Fixtures. Firm assets are stated at costs and
depreciation is computed on a straight line basis over the estimated useful life
of the underlying assets, which range from 3 to 10 years. All major additions
are capitalized. Maintenance, repairs, and minor improvements are expensed as
incurred.
Treasury Stock. The Company uses the cost method in the recording of
the purchase of treasury stock. During 1998 and 1997 the Company purchased 500
shares and 6,000 shares, respectively, of its common stock for its own account.
Short term loans payable: During 1998, the Company entered into
unsecured loan agreements with various individuals. All the loans mature in
fiscal 1999 and interest is calculated at the prime rate at the date of
execution, except for one loan of $25,000 that carries interest of 20%. The
balance represented at December 31, 1998 includes the principal due plus accrued
interest as of that date.
NOTE 3: NET CAPITAL REQUIREMENTS
The following note applies to the Company's wholly owned subsidiary,
Allen & Pierce Securities, Inc.
(A) As a broker dealer, the Company is subject to the Securities and
Exchange Commission's Uniform Net Capital Rule 15c3- 1, which requires that the
ratio of aggregate indebtedness to the excess net capital, as defined, shall not
exceed 15 to 1. In addition, the Company is required to maintain net capital, as
defined, in excess of the lesser of $ 100,000 or 6 2/3% of aggregate
indebtedness. As of December 31, 1998, and December 31, 1997 the Company was in
excess of net capital requirements by $157,156 and $123,708, respectively and
had an aggregate indebtedness to excess net capital ratio of 5.35% and 10.12%,
respectively
F-7
<PAGE>
(B) As an introducing broker, the Company is subject to the Commodities
Futures Trading Commission's Net Capital Rule 1.17 which requires the Company to
maintain net capital, as defined, of the lesser of $30,000 or $3,000 per
associated person, as defined. As of December 31, 1998, and December 31, 1997
the Company was in excess of net capital requirements by $227,156 and $186,209,
respectively.
F-8
<PAGE>
PART III
ITEM I - INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
NO
(2) Agreement and Plan of Reorganization dated March 16, 1999 between
Bedford Holdings, Inc; and SQ Bank
(3.1) Certificate of Incorporation
(3.2) Certificate of Amendment of Certificate of Incorporation
(3.3) Bylaws
(21) List of Subsidiaries
(23) Consent of Donahue Associates, Inc. Public Accountants
(27) Financial Data Schedule
ITEM 2 - DESCRIPTION OF EXHIBITS
Not applicable
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
BEDFORD HOLDINGS, INC.
-----------------------------
By/s/ Leon Zapoll,
Chief Executive Officer
----------------------------------
Date: By:/s/ Robert Samila
Chief Financial Officer
F-9
<PAGE>
Exhibit 2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"),
is made as of March 16, 1999, between Bedford Holdings, Inc., a New
Jersey corporation ("Bedford") and O'ZSANOATQURILISHBANK, a joint stock
company organized under the laws of Uzbekistan.
RECITALS
Bedford desires to exchange shares of common stock of Bedford (the
"Bedford Shares") for not less than 90%, and up to 100%, of the issued and
outstanding common shares and preferred shares of O'ZSANOATQURILISHBANK ("SQ
Bank Stock") through an exchange offer (the "Exchange Offer") to be conducted in
accordance with Regulation S of the Securities and Exchange Commission
("Regulation S") under the Securities Act of 1933, as amended (the "Securities
Act"). Bedford has previously issued 6,000,000 shares of its common stock to SQ
Bank as a good faith deposit, based on the assumption that the two companies
would merge. Since the parties have negotiated a different arrangement, those
shares are being canceled. Bedford is to offer 104.95 shares of its common stock
for each outstanding common share of SQ Bank. If the offer is accepted by all of
the SQ Bank shareholders, the present shareholders of Bedford (other than SQ
Bank) will own 21,243,500 shares, or 20%, of the outstanding common stock of
Bedford and the present shareholders of SQ Bank will own 84,974,000 shares, or
80%, of such outstanding common stock.
Subject to the terms and conditions of this Agreement, Bedford intends
to conduct the Exchange Offer in accordance with the Written Exchange Offer
referred to below.
Following completion of the Exchange Offer, SQ Bank is to use Bedford's
Allen & Pierce subsidiary as its exclusive broker for certain transactions and
is to recommend Allen & Pierce on an exclusive basis to its customers to perform
certain services in the U.S.
Completion of the Exchange Offer, and the other transactions
contemplated by this Agreement are sometimes referred to as the "Proposed
Transactions".
The parties therefore agree as follows:
1. EXCHANGE OFFER; CLOSING.
(a) EXCHANGE OFFER. Subject to the terms and conditions of this
Agreement, Bedford agrees to conduct the Exchange Offer in accordance with
Regulation S and the written Offer of Exchange attached as Exhibit A (the
"Written Exchange Offer").
(b) EXCHANGE AGENT. SQ Bank shall act as exchange agent for the
Exchange Offer ("Exchange Agent"). As Exchange Agent, SQ Bank shall transmit to
each of its shareholders a copy of the Written Exchange Offer, contact each such
shareholder to solicit acceptance of the Written Exchange Offer, act as
custodian for the certificates and other documents required to transfer to
Bedford ownership of the shares of those shareholders tendering in response to
the Written Exchange Offer, and deliver such certificates and documents to
Bedford at the Closing on behalf of such shareholders. Following the Closing, it
shall distribute to its shareholders accepting the Exchange Offer
<PAGE>
the Bedford Shares issued in the exchange in proportion to the numbers of SQ
Bank shares surrendered by them.
(c) CLOSING. Subject to the terms and conditions of this Agreement and
the Written Exchange Offer, the closing of the Exchange Offer (the "Closing")
shall take place at the offices of Bedford as promptly as practicable following
the Expiration Date (as defined in the Written Exchange offer) and in accordance
with the Written Exchange Offer. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date".
2. REPRESENTATIONS AND WARRANTIES OF SQ BANK. SQ Bank represents and warrants to
Bedford as follows:
(a) FINANCIAL STATEMENTS, UNDISCLOSED LIABILITIES. SQ Bank has
delivered to Bedford copies of its audited consolidated financial statements for
the last two fiscal years ended December 31, 1997. Those financial statements
have been prepared in accordance with International Accounting Standards
("IAS"), applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presented, in accordance with
the applicable requirements of IAS. Neither SQ Bank (as defined below) has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by IAS to be set forth on a consolidated balance sheet of
SQ Bank or in the notes thereto, other than as set forth in such financial
statements.
(b) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the most
recent audited financial statements ("SQ Bank Financial Statement Date") SQ Bank
has conducted its business only in the ordinary course (including the
acquisition of properties and issuance of securities) and there has not been (a)
any material adverse change in the business, financial condition, or results of
operations or prospects of SQ Bank (an "SQ Bank Material Adverse Change"), nor
has there been any occurrence or circumstance that with the passage of time
would reasonably be expected to result in an SQ Bank Material Adverse Change,
(b) any split, combination or reclassification of any of SQ Bank's shares of
common stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, or giving the right
to acquire by exchange or exercise, shares of its common stock or preferred
stock, (c) any damage, destruction or loss, whether or not covered by insurance,
that has or would have been an SQ Bank Material Adverse Effect, (d) any change
in accounting methods, principles or practices by SQ Bank materially affecting
its assets, liabilities or business, except insofar as may have been required by
a change in international accounting principles or (e) any amendment of any
employment, consulting, severance, retention or any other agreement between SQ
Bank and any officer of SQ Bank, or (f) any redemption of the shares of SQ
Bank's capital stock. There is no employment or severance contract, or other
agreement requiring payments, or cancellation of indebtedness to which SQ Bank
is a party or other obligation required to be made or satisfied by SQ Bank upon
a change of control or otherwise
2
<PAGE>
as a result of the execution of the Transaction Documents or the consummation of
any of the transactions contemplated by the Transactions Documents.
(c) BOOKS AND RECORDS. The books of account and all other financial
records of SQ Bank are true, complete and correct in all material respects, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements delivered by SQ
Bank. The minute books and other records of SQ Bank have been made available to
Bedford, contain accurate records of all meetings and accurately reflect in all
material respects all other actions of the shareholders, the directors and any
committees.
(d) ORGANIZATION AND GOOD STANDING. SQ Bank is a joint stock company
duly organized, validly existing and in good standing under the laws of
Uzbekistan and has all requisite corporate power and authority to own, operate,
lease and encumber its properties and assets and to carry on its business as it
is now being conducted. SQ Bank's business and properties are such as not to
require registration, licensing or qualification to do business as a foreign
corporation in any country outside Uzbekistan. SQ Bank has delivered to Bedford
true, complete and correct copies of the Certificate of Incorporation of SQ Bank
and its Bylaws (or equivalent documents), in each case, as amended and/or
restated.
(e) CAPITALIZATION OF SQ BANK. The authorized stock of SQ Bank consists
of 970,000 shares of SQ Bank Common Stock and 30,000 shares of preferred stock
("SQ Bank Preferred Stock"), both with a par value of UZSoums 1,000. As of the
date hereof, there are 785,244 shares of SQ Bank Common Stock issued and
outstanding and 24,456 shares of SQ Bank Preferred Stock issued and outstanding.
All such shares have been duly authorized and are validly issued, fully paid and
nonassessable and are free of preemptive rights with no personal liability
attaching to the ownership thereof. SQ Bank has no shares of treasury stock.
(f) NO SUBSIDIARIES. SQ Bank has no subsidiaries. "Subsidiary" of any
Person means any corporation, partnership, limited liability company, joint
venture or other legal entity of which such Person (either directly or through
or together with another Subsidiary of such Person) owns a majority of the
capital stock or other equity interests of such corporation, partnership,
limited liability company, joint venture or other legal entity. As used herein,
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
(g) OPTIONS. There are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which SQ Bank is a party or by which such entity is bound, obligating SQ Bank
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of stock, voting securities or other ownership interest of SQ Bank or
obligating SQ Bank to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking
(other than to SQ Bank).
(h) AUTHORITY OF SQ BANK. SQ Bank has all requisite corporate power and
authority to execute and deliver this Agreement, and any other documents
contemplated by this Agreement or such documents or the transactions
contemplated thereby (the
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"Transaction Documents"), to consummate the transactions contemplated by the
Transaction Documents and to take all other actions required to be taken by them
pursuant to the provisions hereof and thereof. The execution, delivery and
performance by SQ Bank and the consummation by SQ Bank of the transactions
contemplated by the Transaction Documents, have been approved by all requisite
corporate action of SQ Bank, and no other corporate proceedings on the part of
SQ Bank are necessary to authorize the execution, delivery and performance of
the Transaction Documents. The Transaction Documents have been duly and validly
executed and delivered by SQ Bank, and constitute valid and binding agreements
of SQ Bank, enforceable against SQ Bank in accordance with their respective
terms.
(i) CONSENTS AND APPROVALS; NO VIOLATIONS. No filing or registration
with, and no consent, authorization, declaration or approval of, any
governmental body, court, arbitration board, tribunal or authority
("Governmental Entity"), or any third party, is necessary for the execution,
delivery and performance by SQ Bank or its shareholders of the Transaction
Documents or the consummation of the transactions contemplated thereby. The
execution, delivery and performance by SQ Bank of the Transaction Documents and
the transactions contemplated thereby, will not (i) constitute any violation or
breach of any provision of the charter or By-laws of SQ Bank , or (ii)
constitute any violation or breach of any provision of, or constitute a default
(or an event which, with the giving of notice or the passage of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any liens, pledges, mortgages, deeds of trust,
security interests, claims against title, charges, options or other encumbrances
("Encumbrances") upon any of the assets of SQ Bank under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions under (A) the Certificate of Incorporation or the
By-laws of SQ Bank or the comparable charter or organizational documents, each
as amended or supplemented to the date of this Agreement, or (B) any loan or
credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, license, franchise, permit, concession,
contract, or other instrument, or other obligation to which SQ Bank is a party,
or by which SQ Bank, or any of its properties is bound or affected, or (iii)
conflict with or constitute any violation of any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to SQ Bank.
(j) ASSETS AND LIABILITIES. SQ Bank has good and valid title to all
assets used in its business, free and clear of any Encumbrances. The assets
reflected on the balance sheet being delivered pursuant to Section 2(a) hereto
constitute all of the assets used in, and are sufficient for, the operation of
SQ Bank's business as it is presently conducted.
(k) CONTRACTS; DEBT INSTRUMENTS. SQ Bank has not received a written
notice that SQ Bank is in violation of or in default under (nor to the best
knowledge of SQ Bank does there exist any condition which upon the passage of
time or the giving of notice or both would cause such a violation of or default
under) any loan or credit agreement, note, bond, mortgage, indenture, lease,
permit, concession, franchise, license or any other contract, agreement,
arrangement or understanding, to which it is a party or by which it or any of
its properties or assets is bound, nor to the best knowledge of SQ Bank does
such a violation or default exist, except to the extent that such violation or
default, individually
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or in the aggregate, would not have a material adverse effect on the business,
assets, properties, financial condition or results of operations of SQ Bank (an
"SQ Bank Material Adverse Effect"). SQ Bank is not in default under any such
loan or credit agreement, note, bond, mortgage, indenture or any other
agreement.
(l) RELATED PARTY TRANSACTIONS. There are no arrangements, agreements
and contracts entered into by SQ Bank with (a) any consultant, (b) any person
who is an officer, director, employee, Affiliate or shareholder of SQ Bank, any
relative of any of the foregoing or any entity of which any of the foregoing is
an Affiliate or shareholder, officer, director or employee. "Affiliate" shall
have the same meaning as such term is defined in Rule 405 promulgated under the
Securities Act.
(m) LITIGATION. There are no actions, suits or proceedings pending, or
to the best knowledge of SQ Bank, threatened in writing against or affecting SQ
Bank, at law or in equity, that individually or in the aggregate, could
reasonably be expected to (i) have an SQ Bank Material Adverse Effect, or (ii)
prevent the consummation of any of the transactions contemplated by the
Transaction Documents, nor are there any orders, injunctions, judgements or
decrees of any court, arbitrator or other Governmental Entity, to which SQ Bank
is or has been a party or by which SQ Bank's properties are, or have been, bound
or which, insofar as reasonably can be foreseen in the future would have, any
such effect.
(n) COMPLIANCE WITH APPLICABLE LAW. SQ Bank is not in violation of any
order of any Governmental Entity, or any law, ordinance, governmental rule or
regulation ("Laws") to which SQ Bank is subject, except for such violations
that, individually or in the aggregate would not have an SQ Bank Material
Adverse Effect.
(o) NO BROKERS, FINDERS OR INVESTMENT BANKERS. Neither SQ Bank, nor any
of its officers or directors, has employed any broker or finder or investment
banker or incurred any liability which remains unsatisfied for any brokerage or
finder's fee or commission or similar payments in connection with this Agreement
and the transactions contemplated hereby.
(p) SEVERANCE ARRANGEMENTS. There are no severance agreements or
severance policies applicable to employees of SQ Bank.
(q) ACCESS TO RECORDS. SQ Bank has been afforded full and complete
access to all information and other materials relating to Bedford and its
affiliates and the properties, business, financial condition and operations of
Bedford and any other matters, relating to Bedford or the Transaction Documents
and the transactions contemplated thereby which SQ Bank has requested, or deemed
necessary in evaluating the merits and risks of the transactions contemplated
hereby and has been afforded the opportunity to obtain any additional
information necessary to verify the accuracy of any information provided.
(r) RECEIPT OF WRITTEN EXCHANGE OFFER. SQ Bank has received and
reviewed copies of the Written Exchange Offer. Such Written Exchange Offer does
not contain an untrue statement of a material fact relating to SQ Bank or its
officers, directors or stockholders or omit to state any material fact relating
to SQ Bank or its officers, directors or stockholders required to be stated
herein, or necessary in order to make the
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statements therein, in light of the circumstances under which they were made,
not misleading.
3. REPRESENTATIONS AND WARRANTIES OF BEDFORD. Bedford represents and warrants to
SQ Bank as follows:
(a) FINANCIAL STATEMENTS, UNDISCLOSED LIABILITIES. Bedford has
delivered to SQ Bank copies of its audited consolidated financial statements for
the last three fiscal years ended December 31, 1998. Those financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presented, in accordance with
the applicable requirements of GAAP. Neither Bedford nor any of Bedford
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
consolidated balance sheet of Bedford or in the notes thereto) other than as set
forth in such financial statements.
(b) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the most
recent audited financial statements ("Bedford Financial Statement Date") Bedford
and Bedford Subsidiaries have conducted their business only in the ordinary
course (including the acquisition of properties and issuance of securities) and
there has not been (a) any material adverse change in the business, financial
condition, or results of operations or prospects of Bedford and Bedford
Subsidiaries taken as a whole (a "Bedford Material Adverse Change"), nor has
there been any occurrence or circumstance that with the passage of time would
reasonably be expected to result in a Bedford Material Adverse Change, (b) any
split, combination or reclassification of any of Bedford's shares of Common
Stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, or giving the right
to acquire by exchange or exercise, shares of its Common Stock or any issuance
of an ownership interest in, any Bedford Subsidiary, (c) any damage, destruction
or loss, whether or not covered by insurance, that has or would have been a
Bedford Material Adverse Effect, (d) any change in accounting methods,
principles or practices by Bedford or any Bedford Subsidiary materially
affecting its assets, liabilities or business, except insofar as may have been
required by a change in generally accepted accounting principles ("GAAP") or (e)
any amendment of any employment, consulting, severance, retention or any other
agreement between Bedford or any Bedford Subsidiary and any officer of Bedford
or any Bedford Subsidiary, or (f) any redemption of the shares of Bedford's
capital stock. There is no employment or severance contract, or other agreement
requiring payments, or cancellation of indebtedness to which Bedford or a
Bedford Subsidiary is a party or other obligation required to be made or
satisfied by Bedford or any Bedford Subsidiary upon a change of control or
otherwise as a result of the execution of the Transaction Documents or the
consummation of any of the transactions contemplated by the Transactions
Documents.
(c) ORGANIZATION AND GOOD STANDING. (i) Bedford is a corporation duly
formed and existing by virtue of the laws of the State of New Jersey and is in
good standing with the State Department of Taxation of New Jersey and (ii)
Bedford has all requisite trust power to own and operate, lease and encumber its
properties and assets and to carry on its business as it is now being conducted.
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(d) CAPITALIZATION OF BEDFORD. The authorized shares of beneficial
interest of Bedford consist of 40,000,000 shares of common stock, without par
value. As of December 31, 1998, Bedford had issued and outstanding 27,243,500
shares of such common stock. All of the issued and outstanding shares of common
stock of Bedford have been duly authorized and are validly issued, fully paid
and nonassessable. There are no outstanding options or warrants to purchase
shares of common stock of Bedford.
(e) AUTHORITY OF BEDFORD. Bedford has all requisite trust power and
authority to execute and deliver this Agreement and the other Transactions
Documents and to consummate the transactions contemplated by this Agreement and
the other Transaction Documents and to take all other actions required to be
taken by it pursuant to the provisions hereof and thereof. The execution,
delivery and performance by Bedford of this Agreement and the other Transaction
Documents and the consummation by Bedford of the transactions contemplated by
this Agreement and the other Transaction Documents have been duly and validly
authorized and approved by all requisite trust action of Bedford and no other
trust proceedings on the part of Bedford are necessary to authorize the
execution, delivery and performance of this Agreement and the other Transaction
Documents or to consummate the transactions contemplated thereby. This Agreement
and the other Transaction Documents have been duly and validly executed and
delivered by Bedford and constitute valid and binding agreements of Bedford
enforceable against Bedford in accordance with their terms.
(f) CONSENTS AND APPROVALS; NO VIOLATIONS. No filing or registration
with, and no consent, authorization, declaration or approval of, any
Governmental Entity, or any third party, is necessary for the execution,
delivery and performance by Bedford of this Agreement or the other Transaction
Documents or the consummation of the transactions contemplated by this Agreement
and the other Transaction Documents. Neither the execution, delivery and
performance by Bedford of this Agreement or the other Transaction Documents nor
the consummation by Bedford of the transactions contemplated by this Agreement
or the other Transaction Documents will (i) conflict with or constitute any
violation or breach of any provision of the Certificate of Incorporation of
Bedford, (ii) conflict with or constitute any violation or breach of any
provision of, or constitute a default (or an event which, with the giving of
notice or the passage of time or both) under, or result in the termination or in
a right of termination or cancellation of, or accelerate the performance
required by, or result in the creation of any encumbrances upon any of the
properties of Bedford under, or result in being declared void, voidable or
without further binding effect, any of the terms, conditions or provisions of
any agreement, or any license, franchise, permit, concession, lease, contract,
or other instrument, or other obligation to which Bedford is a party, or by
which Bedford or any of its properties is bound or affected or (iii) conflict
with or constitute any violation of any judgment, order, decree, statute, law,
ordinance rule or regulation applicable to Bedford.
(g) NO BROKERS, FINDERS OR INVESTMENT BANKERS. Neither Bedford, nor any
of its officers or directors has employed any broker or finder or investment
banker or incurred any liability which remains unsatisfied for any brokerage or
finder's fee or commission or similar payments in connection with this Agreement
and the transactions contemplated hereby.
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(h) RESPONSES FROM SQ BANK. Bedford has had the opportunity to ask and
have answered any questions concerning the financial condition, business or
operations or any other matter with respect to SQ Bank or with respect to the
merits and risks of an acquisition of SQ Bank common stock, and Bedford has
received complete and satisfactory answers to all such questions.
4. COVENANTS.
(a) CONDUCT OF BUSINESSES.
(i) Prior to the Closing, unless the other party has consented in
writing thereto, Bedford and SQ Bank:
(A) Shall use their reasonable best efforts, and shall cause
each of their respective Subsidiaries to use their reasonable best efforts, to
preserve intact their business organizations and goodwill and keep available the
services of their respective officers and employees;
(B) Shall promptly notify the other of any material emergency
or other material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of their
businesses or in the operation of their properties, any material complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of or before any Governmental Entity, or the breach in any
material respect of any representation or warranty contained herein;
(ii) Prior to the Closing Date, unless Bedford has consented in writing
thereto, SQ Bank shall, shall cause SQ Bank to:
(A) Conduct its operations according to its usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(B) Not amend its Certificate of Incorporation or Bylaws or
other organizational documents, in each case as amended, supplemented and/or
restated to the date hereof;
(C) Not (i) issue any shares of its capital stock, effect any
stock split, reverse stock split, stock dividend, recapitalization or other
similar transaction, (ii) grant, confer or award any option, warrant, conversion
right or other right not existing on the date hereof to acquire any shares of
their capital stock, (iii) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers or directors, or
(iv) adopt any new employee benefit plan (including any stock option, stock
benefit or stock purchase plan) or amend any existing employee benefit plan in
any material respect, except for changes which are less favorable to
participants in such plans;
(D) Not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital stock,
or (ii) directly or indirectly redeem, purchase or otherwise acquire any shares
of its capital stock, or make any commitment for any such action except for the
redemption of the SQ Bank Preferred Stock, if required, in accordance with its
terms; and
(E) Not sell, lease or otherwise dispose of, except in the
ordinary course of business, any of its assets which are material, individually
or in the aggregate;
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(F) Not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent audited consolidated financial statements (or the notes thereto) of
SQ Bank delivered to Bedford in accordance with Section 2(a) hereof or incurred
in the ordinary course of business consistent with past practice;
(G) Not enter into any commitment, contract or agreement other
than in the ordinary course of business; and
(H) Not enter into any commitment, contract or agreement with
any officer, director, consultant or affiliate of SQ Bank.
(b) CHANGES IN CAPITALIZATION. Prior to the Closing Date, unless SQ
Bank has consented in writing thereto, Bedford shall not effect any stock split,
reverse stock split, recapitalization or other similar transactions. SQ Bank
consents to an amendment of Bedford's Certificate of Incorporation to increase
its authorized shares of common stock in an amount sufficient to carry out the
exchange offer.
(c) FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, each of the parties hereto shall: (a) use all reasonable best efforts
to cooperate with one another in (i) determining which filings are required to
be made prior to the Closing Date with, and which consents, approvals, permits
or authorizations are required to be obtained prior to the Closing Date from,
governmental entities in connection with the execution and delivery of this
Agreement and the consummation of the Proposed Transactions and (ii) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; (b) use all reasonable best efforts to obtain in writing any
consents required from third parties in form reasonably satisfactory to SQ Bank
and Bedford necessary to effectuate the Proposed Transactions, and (c) use all
reasonable best efforts to take, or cause to be taken, all other action and do,
or cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the Proposed Transactions. If, at any time after
the Closing Date, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of SQ Bank and
Bedford shall take all such necessary action.
(d) INSPECTION OF RECORDS; OPPORTUNITY TO ASK QUESTIONS. From the date
hereof to the Closing, SQ Bank shall allow all designated officers, attorneys,
accountants and other representatives of Bedford access at all reasonable times
to the records and files, correspondence, audits and properties, as well as to
all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs, of SQ Bank. SQ
Bank will continue to cause the managerial employees, counsel, regular
independent certified public accountants and consultants of SQ Bank to be
available upon reasonable notice to answer questions of Bedford and its duly
authorized representatives. Any investigation carried out by Bedford or its
authorized representatives shall not affect or mitigate SQ Bank's covenants,
representations and warranties in this Agreement, which shall continue in full
force and effect.
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(e) PUBLICITY. Bedford and SQ Bank shall, subject to their legal
obligations (including requirements of stock regulatory organizations and other
similar regulatory bodies) consult with each other before issuing any press
release or making any other public statement, or making any disclosure to any
third party, with respect to the Proposed Transactions, and shall not issue any
such press release, make any such public statement, or make any such disclosure,
without the prior written consent of the other party which consent shall not be
unreasonably withheld. It is further agreed that in determining whether or not a
press release or other public statement or disclosure should be issued or made
and its contents, the overriding concerns shall be that Bedford is a public
company and its obligations as a result thereof and all issues shall be resolved
with that in mind.
(f) LISTING APPLICATION. SQ Bank understands that because of the
limited "float" of Bedford's common shares, and the restrictions on trading
which are required to comply with Regulation S, Bedford's common shares will not
be immediately eligible for listing on the New York Stock Exchange or any other
exchange for some time. As soon as these limitations cease to apply and the
public float is sufficient to permit listing, Bedford shall promptly prepare and
submit to the NYSE or another national securities exchange a listing application
covering Bedford Common Shares, and shall use all reasonable efforts to obtain
approval for the listing of such Bedford Common Shares on such exchange.
(g) FURTHER ACTION. Each party hereto shall, subject to the fulfillment
at or before the Closing Date by the other party of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Proposed
Transactions.
(h) SALE OF SECURITIES OF BEDFORD. SQ Bank understands that its
shareholders will not be entitled to sell or transfer, directly or indirectly,
any Bedford Common Shares held by those shareholders, directly or indirectly,
for a period of two years from the Closing Date, except in offshore transactions
as defined in Regulation S of the U.S. Securities and Exchange Commission (the
"Commission"), in limited quantities after 1 year in accordance with Rule 144 of
the Commission, or pursuant to another exemption from the registration
requirements of the Securities Act of 1933, as amended. and certificates for the
Bedford Shares shall bear restrictive legends to the effect of the foregoing.
5. CONDITIONS.
(a) CONDITIONS TO EACH PARTY'S OBLIGATION TO CONSUMMATE THE EXCHANGE
OFFER. The respective obligation of each party to consummate the Exchange Offer
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(i) Neither of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which prohibits the
consummation of the Proposed Transactions. In the event any such order or
injunction shall have been issued, each party agrees to use its reasonable best
efforts to have any such injunction lifted.
(ii) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental entity or third parties required
in connection with
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the Proposed Transactions which are to occur before the Closing Date shall have
been obtained or made.
(iii) Each party shall have delivered all such documents or
certificates and disclosed such information as the other party may reasonably
request.
(b) CONDITIONS TO OBLIGATIONS OF BEDFORD TO CONSUMMATE THE EXCHANGE
OFFER. The obligation of Bedford to consummate the Exchange Offer shall be
subject to the fulfillment at or prior to the Closing of the following
conditions, unless waived by Bedford:
(i) Bedford shall have reasonably satisfied itself that any
approvals and other requirements of the governments of the U. S. and Uzbekistan
for consummation of the transactions contemplated by this Agreement have been
received or complied with.
(ii) There shall not have occurred any social or political
development in Uzbekistan which, in the sole judgment of Bedford, would have a
material adverse effect on the prospective operations of SQ Bank or on the
ability of the parties to achieve the benefits contemplated by this Agreement.
(iii) SQ Bank shall have performed its agreements contained in
this Agreement required to be performed on or prior to the Closing and the
representations and warranties of SQ Bank contained in this Agreement (without
giving effect to any materiality qualifications or exceptions contained therein)
shall be true and correct in all material respects as of the Closing Date as if
made on the Closing Date, and Bedford shall have received a certificate of the
President or a Vice President of SQ Bank, dated the Closing Date, certifying to
such effect;
(iv) Any waiver or consent of the holders of the SQ Bank
Preferred Stock, or of any indebtedness of SQ Bank, required in connection with
the Proposed Transactions shall have been obtained.
(v) From the date of this Agreement through the Closing, there
shall not have occurred any change in the financial condition, business,
operations or prospects of SQ Bank that would have or would be reasonably likely
to have an SQ Bank Material Adverse Effect.
(vi) Holders not less than 90% of SQ Bank's common stock shall
have tendered their shares for acceptance in accordance with the Written
Exchange Offer.
(vii) Bedford shall have entered into an employment agreement
reasonably satisfactory to it with Robert Samila. SQ Bank understands that such
agreement will provide that Mr. Samila shall not be discharged without cause for
a term of 10 years after the Closing Date.
6. TERMINATION.
(a) TERMINATION BY MUTUAL CONSENT. This Agreement and the Exchange
Offer may be terminated at any time prior to the Closing Date, by the mutual
written consent of Bedford and SQ Bank.
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(b) TERMINATION BY SQ BANK OR BEDFORD. This Agreement may be terminated
and the Exchange Offer may be terminated by action of the Board of Directors of
SQ Bank or the Board of Directors of Bedford if (a) the Exchange Offer shall not
have been consummated by December 31, 1999, or (b) a United States federal or
state court of competent jurisdiction or other Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable, provided, that the party seeking to terminate this
Agreement pursuant to this clause (b) shall have used all reasonable efforts to
remove such order, decree, ruling or injunction; and provided, in the case of a
termination pursuant to clause (a) above, that the terminating party shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the occurrence of the
failure referred to in said clause.
(c) TERMINATION BY SQ BANK. This Agreement may be terminated and the
Exchange Offer may be terminated at any time prior to the Closing Date, by
action of the Board of Directors of SQ Bank, if (a) there has been a breach by
Bedford of any representation or warranty contained in this Agreement which
would have or would be reasonably likely to materially impair Bedford's ability
to consummate the transactions contemplated by the Transaction Documents, which
breach is not curable by the 15th day prior to the Closing Date, (b) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of Bedford, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by SQ Bank
to Bedford, or (v) any restriction materially adversely affecting the Proposed
Transactions which was not in effect on the date hereof shall have become
effective.
(d) TERMINATION BY BEDFORD. This Agreement and the Exchange Offer may
be terminated at any time prior to the Closing Date, if (a) after the date
hereof: (v) any restriction materially adversely affecting the Proposed
Transactions which was not in effect on the date hereof shall have become
effective; (b) there has been a breach by SQ Bank of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an SQ Bank Material Adverse Effect or, materially impair SQ
Bank's or its shareholders' ability to consummate the transaction contemplated
by the Transaction Documents, which breach is not curable by the 15th day prior
to the Closing Date, or (c) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of SQ Bank which
breach is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by Bedford to SQ Bank .
(e) EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement and the termination of the Exchange Offer pursuant to this
Article 6, all obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Section 8. Upon termination of this
Agreement for any reason, the shares previously delivered to SQ Bank as a good
faith deposit shall be canceled and certificate for such shares shall be
surrendered to Bedford for cancellation.
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(f) EXTENSION; WAIVER. At any time prior to the Closing Date, any party
hereto, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
7. POST-CLOSING TRANSACTIONS.
(a) DESIGNATION OF BEDFORD TO PERFORM CERTAIN SERVICES. For a period of
24 months after the Closing, SQ Bank shall use Bedford as its exclusive broker
for all of its securities and commodities transactions (including foreign
exchange and other futures transactions) to be executed in the U.S. market, and
shall recommend Allen & Pierce to its customers to provide securities and
commodities brokerage, capital raising and other investment and financial
services in the U.S. which Allen & Pierce is capable of providing.
(b) FINANCING TO BE RAISED BY BEDFORD. During the 24 months after the
Closing, Bedford shall use its best efforts to raise financing or earn as
commissions or otherwise an aggregate of not less than $30 million. For purposes
of this computation, any commitment to contribute cash in the future shall be
deemed to have been raised during the 24 month period if the commitment is made
during such 24 month period and Bedford is entitled to require payment of such
cash within 36 months after the Closing. In the event Bedford does not reach
such $30 million target, Bedford shall at the end of such 24 month period issue
additional shares to holders of shares issued to the former shareholders of SQ
Bank, in proportion to such shares held by them in the Company at the time, in a
number sufficient to increase the percentage ownership of such holders to a
percentage equal to the percentage of the outstanding common stock of Bedford
originally issued to them, plus 16% multiplied by a fraction of which the
numerator is the actual amount earned or raised by Bedford and the denominator
is $30 million. For example, if all of the SQ Bank shareholders were to accept
the Exchange Offer, and the aggregate amount earned and otherwise raised were
$15 million, the percentage owned by holders of the shares issued to the former
SQ Bank shareholders would be increased to 88%.
(c) DESIGNATION OF DIRECTORS. Promptly after the closing, the Board of
Directors of Bedford shall be reconstituted to consist of 5 directors nominated
by SQ Bank and 2 directors nominated by Bedford. For so long as any one of the
present shareholders of Bedford continues to hold at least 10% of Bedford's
outstanding common stock, SQ Bank and its management will use their best efforts
to nominate for election to the board of directors of Bedford at least two
directors designated by that shareholder. It is understood that prior to the
Closing Bedford intends to amend its Certificate of Incorporation to provide
that certain major transactions will require the consent of the entire Board of
Directors.
8. INDEMNIFICATION.
(a) BY BEDFORD. Bedford agrees to indemnify and hold harmless SQ Bank
and its shareholders and their respective Affiliates, and their respective
shareholders, partners, directors, officers, employees, agents, successors and
assigns (each an "indemnified
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person") from and against, and to reimburse any such indemnified person when
incurred with respect to, any and all Losses incurred by such indemnified person
by reason of or arising out of or in connection with (i) the breach of any
representation or warranty made by or on behalf of Bedford contained in this
Agreement, any other Transaction Document or any exhibit hereto or thereto or in
any schedule or certificate furnished or to be furnished to the SQ Bank
shareholders pursuant to or in connection with this Agreement, any other
Transaction Document or any of the transactions hereby contemplated, (ii) the
failure of Bedford to perform any agreement required by this Agreement or any
other Transaction Document to be performed by it.
(b) BY SQ BANK. SQ Bank agrees to indemnify and hold harmless Bedford
and its Affiliates, shareholders, partners, trustees, directors, officers,
employees, agents, successors and assigns (each an "indemnified person") from
and against, and to reimburse any such indemnified person when incurred with
respect to, any Losses incurred by such indemnified person by reason of or
arising out of or in connection with (i) the breach of any representation or
warranty made by or on behalf of the SQ Bank contained in this Agreement, any
other Transaction Document or any exhibit hereto or thereto or in any schedule
or certificate furnished or to be furnished to Bedford pursuant to or in
connection with this Agreement, any other Transaction Document or any of the
transactions hereby contemplated, (ii) the failure of SQ Bank to perform any
agreement required by this Agreement or any other Transaction Document to be
performed by it.
9. GENERAL PROVISIONS.
(a) SURVIVAL. All statements, certifications, indemnifications,
representations and warranties made hereby by the parties to this Agreement, and
their respective covenants, agreements and obligations to be performed pursuant
to the terms hereof, shall survive the Closing, notwithstanding any examination
by or on behalf of any party hereto, notwithstanding any notice of a breach or
of a failure to perform not waived in writing and notwithstanding the
consummation of the transactions hereby contemplated with knowledge of such
breach or failure, and the representations and warranties made hereby by the
parties shall terminate on the second anniversary of the Closing Date, except to
the extent a party gives written notice to the other parties of any breach
thereof on or before such date, and then only with respect to the matters
described in such notice; provided, however, that nothing herein contained shall
modify or be construed to modify in any respect whatsoever any covenant,
agreement or obligation to be performed by any party pursuant to the provisions
of this Agreement.
(b) NOTICES. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to Bedford:
Bedford Holdings, Inc.
90 West Street
New York NY 10006
Attention: Leon Zapoll
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With a copy to:
David C. Thomas
1 Old Country Road
Carle Place, New York 11514
If to SQ Bank:
O'zsanoatqurilishbank
700000 Tashkent
GSP
Abdulla Tukay St, 3
With a copy to:
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
(c) ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
(d) ENTIRE AGREEMENT. This Agreement, the Exhibits and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
(e) AMENDMENT. This Agreement may be amended by the parties hereto.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
(f) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its rules of
conflict of laws. SQ Bank hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the State of New York and
of the United States of America located in the State of New York (the "New York
Courts") for any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying of
venue of any such litigation in the New York Courts and agrees not to plead or
claim in any New York Court that such litigation brought therein has been
brought in an inconvenient forum.
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(g) COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
(h) HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
(i) INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
(j) WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
(k) INCORPORATION. All Exhibits attached hereto and referred to herein
are hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
(l) SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
(m) ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any New York Court, this being in addition to
any other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
BEDFORD HOLDINGS, INC.
By: _________________________
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Name:
Title:
SQ Bank
By: __________________________
Name:
Title:
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR
TO U.S. PERSONS (OTHER THAN DISTRIBUTORS) UNLESS THE SECURITIES ARE REGISTERED
UNDER THAT ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THAT ACT
IS AVAILABLE. HEDGING TRANSACTIONS INVOLVING THOSE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THAT ACT.
OFFER OF EXCHANGE
GENERAL
Bedford Holdings, Inc. ("Bedford") hereby offers, upon the terms and
subject to the conditions set forth herein and in the related Letter of
Transmittal, to exchange 104.95 shares of its common stock ("Bedford Shares")
for each outstanding share of common stock or preferred stock of
O'ZSANOATQURILISHBANK ("SQ Bank Share"), validly tendered on or prior to the
Expiration Date and not properly withdrawn. The exchange is to be made as
provided in an Agreement and Plan of Reorganization between Bedford and
O'ZSANOATQURILISHBANK (the "Bank"). The purpose of the Offer is to enable
Bedford to acquire not less than 90% and up to 100% of the outstanding SQ Bank
Shares. If the offer is concluded, the Bank will become a subsidiary of Bedford;
if all of the shareholders of the Bank accept the Offer, the present
shareholders of the Bank will own 80% of the common stock of Bedford.
BEDFORD HOLDINGS, INC.
Bedford was established in 1996 as a holding company for Allen & Pierce
Securities, Inc., a U.S. broker-dealer ("Allen & Pierce"), and with a view
toward acquiring other businesses. Allen & Pierce was established by Mr. Leon
Zapoll, a former Russian citizen, to engage in a general securities and
commodities brokerage business, and has been in business since 1989. It is
registered as a securities broker-dealer with the U.S. Securities and Exchange
Commission and as a commodities introducing broker with the U.S. Commodities
Futures Trading Corporation.
With the disintegration of the former USSR and the opening of the Russian
economy in the early 1990s Bedford saw an opportunity to take advantage of Mr.
Zapoll's language and knowledge of the countries of the CIS to develop a new
source of brokerage business. Mr. Zapoll traveled extensively in Russia and
Uzbekistan in the early 1990s and was successful in developing a significant
number of new trading accounts which, over the next several years yielded
substantial commission revenues. With the turmoil in the Russian economy of the
mid to late 1990s Russian government severely restricted the ability of Russian
citizens to maintain securities and commodities trading accounts abroad. This
restriction, coupled with substantial losses suffered by certain of Bedford's
customers, resulted in a precipitous drop in Bedford's commission revenues. In
late 1997
<PAGE>
Bedford began to develop a new business strategy designed to take advantage of
the contracts Mr. Zapoll had made through travels in the CIS. Mr. Zapoll had
found that in both Russia and Uzbekistan privatization was creating a large
number of private business enterprises with one thing in common -- a serious and
immediate need for capital. The strategies which Bedford devised was to use
Bedford's "window to Wall Street" as a broker-dealer to open access to the U.S.
capital market for these companies.
Bedford has selected Uzbekistan as having the most promising combination of
business enterprises and government policies toward outside capital. In early
1998 Bedford began discussions with the Bank with a view toward creating an
opening to the U.S. capital markets for the bank and its customers.
In March, 1999 Bedford entered into an Agreement and Plan of Reorganization
under which it agreed to offer to exchange shares representing 80% of its
outstanding common stock for the outstanding common shares of the Bank.
The Agreement and Plan of Reorganization requires that for a period of 24 months
after the Closing, the Bank shall use Allen & Pierce as its exclusive broker for
all of its securities and commodities transactions (including foreign exchange
and other futures transactions) to be executed in the U.S. market, and shall
recommend Allen & Pierce to its customers to provide securities and commodities
brokerage, capital raising and other investment and financial services in the
U.S. which Allen & Pierce is capable of providing.
Following the exchange, if it is successful, Bedford intends to offer, through
Allen & Pierce, a wide variety of financial services to the Bank's customers.
The services are expected to include identifying potential U.S. joint venture
partners for such customers, advice concerning, and structuring of, investment
in such companies, and general brokerage services for the purchase of U.S. debt
and equity securities and commodities futures. It is expected that initially
Bedford's efforts will focus primarily on foreign exchange brokerage for the
Bank, and identifying joint venture partners and raising investment capital in
the private market for the Bank's customers.
The Agreement and Plan of Reorganization requires that during the initial 24
months after closing of the exchange Bedford must earn or raise not less than
$30 million in capital. In the event that Bedford is not successful in raising
this minimum amount, the former shareholders of the Bank will be entitled to
additional shares of Bedford's common stock in amounts depending upon the
shortfall. The number of additional shares is determined by multiplying 16% of
Bedford's outstanding common stock by a fraction of which the numerator is the
amount raised by Bedford and the denominator is $30 million. The maximum
additional amount which such shareholders may receive (if all of such
shareholders accept the exchange offer) is the number of shares required to
bring their interest to 96% of the outstanding capital stock of the Bedford.
The Bank will act as Exchange Agent and will be responsible for transmitting to
each of its shareholders a copy of this Exchange Offer, contacting each such
shareholder to solicit
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acceptance of the Exchange Offer, acting as custodian for the certificates and
other documents required to transfer to Bedford ownership of the shares of those
shareholders tendering in response to the Exchange Offer, and delivering such
certificates and documents to Bedford at the Closing on behalf of such
shareholders. Following the Closing, the Bank is also to distribute the Bedford
Shares to its shareholders accepting the Exchange Offer in proportion to the
numbers of the Bank shares surrendered by them.
Bedford is also in the process of installing an online trading system in the
Internet's World Wide Web. Unlike most smaller brokerage firms with an online
presence, the system being installed by Bedford will provide for execution of
both securities and commodities trades. The Web page will appear in four
languages - English, French, Russian and either German or Chinese. Bedford
believes that in many cases high net worth individuals whose first language is
not English, and companies owned by such individuals, are more comfortable
dealing in their native language in financial matters and will find Bedford's
system attractive.
REASONS FOR THE EXCHANGE
Bedford's management believes that the proposed exchange will be beneficial for
the Bank, for Bedford and for the Bank's shareholders.
CAPTURE COMMISSIONS ON SECURITIES AND COMMODITIES TRANSACTIONS MADE BY THE BANK
At the present time the Bank pays a commission to a U.S. broker on each
securities, commodities or foreign exchange futures transaction executed for it
in the U.S. markets. Bedford's Allen & Pierce subsidiary is licensed both as a
securities broker and as a commodities broker. By carrying out its U.S.
securities and commodities transactions through Allen & Pierce, the Bank will
effecively recapture up to 80% of these commissions for the benefit of the
Bank's shareholders.
PROVIDE A WINDOW TO U.S. FINANCIAL MARKETS FOR CUSTOMERS OF THE BANK
The Bank's customers include some of the largest business enterprises in
Uzbekistan, as well as a number of smaller business enterprises. With the
opening of world markets accompanying privatization, these customers will
increasingly be facing competition both within the country and from companies
located abroad. In order to effectively compete in a more open market, major
infusions of capital are required to modernize machinery, equipment and computer
systems. While the Bank is in a position to satisfy many of its customers'
borrowing requirements, it does not have direct access to the international
markets for equity capital. Without an adequate equity capital base, the amount
these customers can borrow is limited.
In recent years foreign investment by U.S. businesses has increasingly been made
in the form of joint ventures, in which the U.S. business may contribute either
cash or technology, know-how or equipment. In order to attract capital in the
form of joint venture investments, it is important that the local company be
able to identify an
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appropriate U.S. partner and explain to the potential partner the advantages of
the proposed venture.
New York is perhaps the leading center today for raising equity capital. Its
investment banking firms are constantly seeking potentially profitable
enterprises in order to offer shares of those enterprises to the public. In
addition, a number of private investors, including both individuals and
investment funds are actively looking for investment opportunities in non-public
companies which they hope will eventually be sold to the public.
In the U.S., offerings of stock in both the public and private market are
subject to regulation by both the national government and the 50 states. Anyone
participating in the distribution of securities of other companies on a regular
basis is required to be registered, and is subject to detailed rules and
supervision of its activities. As a registered securities broker-dealer and a
member of the National Association of Securities Dealers, Inc., Allen & Pierce
is authorized to participate in the distribution of securities, and has contacts
in the investment banking business with larger investment banks that carry out
public offerings on a regular basis. As a result, it is in a position to provide
a variety of financial services to the Bank's customers, including identifying
potential U.S. joint venture partners, advice concerning, and structuring of,
investment by U.S. investors, and general brokerage services for the purchase of
U.S. debt and equity securities. Insofar as access to the public market is
desired by these customers, Bedford anticipates introducing the customers to
major and middle-level U.S. underwriters and participating as one of a number of
a members of the selling syndicate.
PROVIDE THE BANK'S SHAREHOLDERS WITH A MARKET FOR THEIR SECURITIES
At the present time there is no way that the Bank's shareholders can easily and
quickly sell their shares in the Bank for cash. The proposed exchange will give
shareholders of the Bank stock in a publicly traded U.S. company.
In the U.S., shares of an actively traded public company can be quickly sold,
either to a securities firm acting as a "market-maker" (for shares not listed on
a stock exchange), or on the stock exchange (for shares listed on the exchange).
Because of the requirements of U.S. law, the Bedford Shares received in the
exchange will not be immediately tradable in the U.S. market. However, after the
shares have been held for 1 year they may be sold in limited quantities through
a broker, and after they have been held for 2 years they may be sold in
unlimited quantities. Prior to the one or two-year periods referred to above,
holders will be able to sell their Bedford Shares only in "offshore
transactions" - essentially transactions with non-U. S. persons, who will remain
subject to the same restrictions. At the present time, Bedford's size and the
limited number of shares in the hands of the public prevent it from being listed
on the New York Stock Exchange. Following completion of the Exchange Offer, the
size will be sufficient to apply for listing, but the number of shares in the
hands of the U.S. public and eligible for trading in the U.S. will not be
sufficient until more of its shares enter the U.S. market either through sales
by former SQ Bank shareholders or by other means. Under the Exchange
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Agreement, Bedford is required to apply for New York Stock Exchange listing as
promptly as practicable after it becomes eligible for such listing.
CONDITIONS TO THE OFFER.
The exchange offer is subject to a number of conditions, including the
following:
(i) Bedford shall have reasonably satisfied itself that any approvals and other
requirements of the governments of the U. S. and Uzbekistan for consummation of
the transactions contemplated by this offer have been received or complied with.
(ii) There shall not have occurred any social or political development in
Uzbekistan which, in the sole judgment of Bedford, would have a material adverse
effect on the prospective operations of the Bank or on the ability of the
parties to achieve the benefits contemplated by the Agreement and Plan of
Organization;
(iii) The Bank shall have performed its agreements contained in the Agreement
and Plan of Reorganization required to be performed on or prior to the Closing
and the representations and warranties of the Bank contained in the Agreement
and Plan of Reorganization (without giving effect to any materiality
qualifications or exceptions contained therein) shall be true and correct in all
material respects as of the Closing Date as if made on the Closing Date.
(iv) Any waiver or consent of the holders of the SQ Bank Preferred Stock, or of
any indebtedness of the Bank, required in connection with the proposed
transactions shall have been obtained.
(v) There shall not have occurred any change in the financial condition,
business, operations or prospects of the Bank and its subsidiaries, taken as a
whole, that would have or would be reasonably likely to have a material adverse
effect on the business, financial condition, or results of operations or
prospects of the Bank and its subsidiaries taken as a whole.
(vi) Holders not less than 90% of the Bank's common stock shall have tendered
their shares for acceptance in accordance with this offer (the "Minimum Tender
Condition").
(vii) Bedford shall have entered into an employment agreement reasonably
satisfactory to it with Robert Samila, the person holding certain licenses
essential to Bedford's operations as a broker-dealer. That agreement is expected
to provide that Mr. Samila shall not be discharged without cause for a term of
10 years after the Closing Date.
(viii) Neither Bedford nor the Bank shall be subject to any order or injunction
of a court of competent jurisdiction which prohibits the consummation of the
Proposed Transactions.
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This offer is made only to holders of SQ Bank Shares who are not "U.S.
persons" as defined in Regulation S of the U.S. Securities and Exchange
Commission. Each person tendering SQ Bank Shares will be required to certify
that he is not a U.S. person and is not acquiring the securities for the account
or benefit of any U.S. person.
TIMING OF THE OFFER
The Offer is currently scheduled to expire on the 90th day after the
date of this Offer of Exchange; however, Bedford has the right, subject to the
Agreement, to extend or amend the Offer at any time or from time to time, as the
case may be, and may choose to extend the Offer as necessary until all
conditions to the Offer have been satisfied or waived. Bedford may also
terminate the Offer if the conditions precedent to the Offer have not been
satisfied.
EXTENSION, TERMINATION AND AMENDMENT
Bedford also reserves the right, in its sole discretion, at any time or
from time to time, (i) to delay acceptance for, exchange of, any SQ Bank Shares
for Bedford shares pursuant to the Offer, or, subject to the provisions of the
Agreement, to terminate the Offer and not accept for exchange, or exchange, any
SQ Bank Shares for Bedford Shares not theretofore accepted for exchange, or
exchanged, upon the failure of any of the conditions of the Offer to be
satisfied, or for any other reason and (ii) to waive any condition or, subject
to the Agreement, otherwise amend the Offer in any respect, by giving oral or
written notice of such delay, termination or amendment to the Exchange Agent and
by making a public announcement thereof. Any such extension, termination,
amendment or delay will be followed as promptly as practicable by public
announcement thereof, such announcement in the case of an extension to be issued
no later than 9:00 a.m., Tashkent time, on the next business day after the
previously scheduled Expiration Date. Subject to applicable law and without
limiting the manner in which Bedford may choose to make any public announcement,
Bedford shall have no obligation to publish, advertise or otherwise communicate
any such public announcement other than by making a release to Business News in
the US. During any such extension, all SQ Bank Shares previously tendered and
not withdrawn will remain subject to the Offer, subject to the right of a
tendering SQ Bank shareholder to withdraw his or her SQ Bank Shares.
Bedford confirms that if it makes a material change in the terms of the
Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, Bedford will extend the Offer for at least 10 days. If,
prior to the Expiration Date, Bedford shall increase or decrease the percentage
of SQ Bank Shares being sought or the consideration offered to holders of SQ
Bank Shares, such increase or decrease shall be applicable to all holders whose
SQ Bank Shares are accepted for exchange pursuant to the Offer, and, if at the
time notice of any such increase or decrease is first published, sent or given
to holders of SQ Bank Shares, the Offer is scheduled to expire at any time
earlier than the tenth business day from and including the date that such notice
is first so published, sent or given, the Offer will be extended until the
expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other
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than a Saturday, Sunday or a federal holiday in the United States or holiday in
Uzbekistan and consists of the time period from 12:01 a.m. through 12:00
midnight, Eastern time.
EXCHANGE OF BEDFORD SHARES FOR SQ BANK SHARES; DELIVERY OF BEDFORD SHARES
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Bedford will accept for exchange, and will exchange,
Bedford Shares for SQ Bank Shares validly tendered and not properly withdrawn as
promptly as practicable following the Expiration Date. In addition, subject to
applicable rules of the Commission, Bedford expressly reserves the right to
delay acceptance of or the exchange of SQ Bank Shares in order to comply with
any applicable law. In all cases, exchange of SQ Bank Shares tendered and
accepted for exchange pursuant to the Offer will be made only after receipt by
the Exchange Agent of certificates for such SQ Bank Shares, a properly completed
and duly executed Letter of Transmittal or facsimile thereof and any other
required documents.
Upon the terms and subject to the conditions of the Offer and the
Agreement, including Bedford's rights to terminate, amend or extend the offer,
Bedford will accept for exchange all validly tendered SQ Bank Shares. Each SQ
Bank Shareholder may tender all or any portion of his or her SQ Bank Shares.
For purposes of the Offer, Bedford will be deemed to have accepted for
exchange SQ Bank Shares validly tendered and not withdrawn as, if and when
Bedford gives oral or written notice to the Exchange Agent of its acceptance of
the tenders of such SQ Bank Shares pursuant to the Offer. The Exchange Agent
will act as agent for tendering SQ Bank shareholders for the purposes of
receiving the Bedford Shares and transmitting such Bedford Shares to tendering
SQ Bank shareholders.
If any tendered SQ Bank Shares are not accepted for exchange pursuant
to the terms and conditions of the Offer for any reason, certificates for such
unexchanged SQ Bank Shares will be returned without expense to the tendering SQ
Bank shareholder, as soon as practicable following expiration or termination of
the Offer.
This exchange offer is being made in accordance with Regulation S of
the U.S. Securities and Exchange Commission. Each holder of SQ Bank Shares who
accepts the offer will be required to agree to resell the Bedford Shares only in
accordance with the provisions of Regulation S, pursuant to registration under
the Securities Act of 1933, as amended, or pursuant to an available exemption
from registration; and to agree not to engage in hedging transactions with
regard to such securities unless in compliance with that Act
Under Regulation S, the shares of Bedford received in the exchange will
be "restricted" securities within the meaning of Rule 144 under the Securities
Act, the certificates for the Bedford Shares will bear a legend to that effect.
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In general, under Rule 144 as currently in effect, if one year has
elapsed since the later of the date of acquisition of restricted shares from
Bedford or any "affiliate" of Bedford, as that term is defined under the
Securities Act, the acquiror or subsequent holder thereof is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1.0% of the then outstanding shares of common stock of Bedford or the
average weekly trading volume of such common stock during the four calendar
weeks preceding the date on which notice of the sale is filed with the
Commission. Sales under Rule 144 also are subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about Bedford. If two years have elapsed since the date of
acquisition of restricted shares from Bedford or from any "affiliate" of
Bedford, and the acquiror or subsequent holder thereof is deemed not to have
been an "affiliate" of Bedford at any time during the three months preceding a
sale, such person would be entitled to sell such shares in the public market
under Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.
The restrictions described above will not apply to "offshore
transactions" as defined in Regulation S generally, sales made to a person
outside the United States who is not a U. S. person. Bedford Shares purchased in
offshore transactions will continue to be restricted securities and will remain
subject to the restrictions described above in the hands of the purchasers.
WITHDRAWAL RIGHTS
Tenders of SQ Bank Shares made pursuant to the Offer are irrevocable,
except that SQ Bank Shares tendered pursuant to the Offer may be withdrawn
pursuant to the procedures set forth below at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent at 700000 Tashkent, GSP, Abdulla Tukay St. 3, and must specify
the name of the person having tendered the SQ Bank Shares to be withdrawn, the
number of SQ Bank Shares to be withdrawn and the name of the registered holder,
if different from that of the person who tendered such SQ Bank Shares. If
certificates have been delivered or otherwise identified to the Exchange Agent,
the name of the registered holder and the serial numbers of the particular
certificates evidencing the SQ Bank Shares withdrawn must also be furnished to
the Exchange Agent as aforesaid prior to the physical release of such
certificates.
All questions as to the form and validity (including time of receipt)
of any notice of withdrawal will be determined by Bedford, in its sole
discretion, which determination shall be final and binding. Neither Bedford, the
Exchange Agent, nor any other person will be under any duty to give notification
of any defects or irregularities in any notice of withdrawal or will incur any
liability for failure to give any such notification. Any SQ Bank Shares properly
withdrawn will be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn SQ Bank Shares may be retendered by
8
<PAGE>
following the procedure described under "--Procedure for Tendering" at any time
prior to the Expiration Date.
PROCEDURE FOR TENDERING
For an SQ Bank shareholder validly to tender SQ Bank Shares pursuant to
the Offer, a properly completed and duly executed Letter of Transmittal (or
manually executed facsimile thereof), together with any required signature
guarantees, and any other required documents, must be transmitted to and
received by the Exchange Agent at its address set forth above and certificates
for tendered SQ Bank Shares must be received by the Exchange Agent at such
address prior to the Expiration Date. Any SQ Bank shareholder that desires to
tender SQ Bank Shares and whose certificates for such SQ Bank Shares are not
immediately available or who cannot deliver all required documents to the
Exchange Agent prior to the Expiration Date, should contact the Exchange Agent
immediately at 700000 Tashkent, GSP, Abdulla Tukay St. 3.
No signature guarantee is required on the Letter of Transmittal in
cases where the Letter of Transmittal is signed by the registered holder(s) of
the SQ Bank Shares tendered therewith. If the certificates for SQ Bank Shares
are registered in the name of a person other than the signer of the Letter of
Transmittal, or if certificates for unexchanged SQ Bank Shares are to be issued
to a person other than the registered holder(s), the certificates must be
endorsed or accompanied by appropriate documents evidencing the authority of the
signer to tender the shares, in either case signed exactly as the name or names
of the registered owner or owners appear on the certificates, with the
signature(s) on the certificates or stock powers guaranteed as aforesaid.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
In all cases, exchanges of SQ Bank Shares tendered and accepted for
exchange pursuant to the Offer will be made only after timely receipt by the
Exchange Agent of certificates for SQ Bank Shares, properly completed and duly
executed Letter(s) of Transmittal (or facsimile(s) thereof), and any other
required documents.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of SQ Bank Shares will be
determined by Bedford, in its sole discretion, which determination shall be
final and binding. Bedford reserves the absolute right to reject any and all
tenders of SQ Bank Shares determined by it not to be in proper form or the
acceptance of or exchange for which may, in the opinion of Bedford's counsel, be
unlawful. Bedford also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in the tender of any SQ
Bank Shares. No tender of SQ Bank Shares will be deemed to have been validly
made until all
9
<PAGE>
defects and irregularities in tenders of SQ Bank Shares have been cured or
waived. Neither Bedford, the Exchange Agent nor any other person will be under
any duty to give notification of any defects or irregularities in the tender of
any SQ Bank Shares or will incur any liability for failure to give any such
notification. Bedford's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and instructions thereto) will be final and
binding.
The tender of SQ Bank Shares pursuant to any of the procedures
described above will constitute a binding agreement between the tendering SQ
Bank shareholder and Bedford upon the terms and subject to the conditions of the
Offer.
TERMINATION OF THE OFFER
The Agreement and the Exchange Offer may be terminated by action of the
Board of Directors of the Bank or the Board of Directors of Bedford by mutual
agreement, or, under certain circumstances, including, if (a) the Exchange Offer
shall not have been consummated by December 31, 1999, or (b) a United States
federal or state court of competent jurisdiction or other Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Agreement and such order, decree, ruling or other action
shall have become final and non-appealable, provided, that the party seeking to
terminate the Agreement pursuant to clause (b) shall have used all reasonable
efforts to remove such order, decree, ruling or injunction; and provided, in the
case of a termination pursuant to clause (a) above, that the terminating party
shall not have breached in any material respect its obligations under the
Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in that clause.
Notwithstanding any other provision of the Offer, and subject to the
Agreement, Bedford shall not be required to accept for exchange or exchange any
SQ Bank Shares, may postpone the acceptance for exchange or exchange for
tendered SQ Bank Shares and may, in its sole discretion, terminate or amend the
Offer as to any SQ Bank Shares not then exchanged for any reason, including,
without limitation, if at the Expiration Date either the Minimum Tender
Condition has not been satisfied or waived or if on or prior to the Expiration
Date, Bedford believes that the representations and warranties of the Bank
contained in the Agreement are not, at that point, true and correct. Any
conditions to this Offer are for the sole benefit of Bedford and may be asserted
by Bedford regardless of the circumstances giving rise to any such conditions
(including any action or inaction by Bedford) or may be waived by Bedford in
whole or in part. The determination as to whether any condition has been
satisfied shall be in the reasonable judgment of Bedford and will be final and
binding on all parties. The failure by Bedford at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, and each
such right shall be deemed a continuing right which may be asserted at any time
and from time to time, prior to the consummation of the Exchange Offer.
Notwithstanding the fact that Bedford reserves the right to assert the failure
of a condition following acceptance for exchange but prior to exchange in order
to delay exchange or cancel its obligation to
10
<PAGE>
exchange properly tendered SQ Bank Shares, Bedford will either promptly exchange
such SQ Bank Shares or promptly return such SQ Bank Shares.
ACCOUNTING TREATMENT
Bedford will account for the acquisition of the SQ Bank Shares pursuant
to the Offer using the pooling of interests method of accounting. Since Bedford
is extremely small at the present time in relationship to the bank, its
financial statements after the transaction will be substantially the same as the
financial statements of the Bank before the transaction. The Bank's financial
position and results of operations will not be included in Bedford's
consolidated accounts prior to the consummation date of the Exchange Offer.
Dated: March 16, 1999
<PAGE>
LETTER OF TRANSMITTAL
Dear Shareholder of O'zsanoatqurilishbank.:
This Letter of Transmittal enables you to exchange your common shares
or preferred shares ("Bank Shares") of O'zsanoatqurilishbank, ("Bank") for
Bedford Holdings, Inc. ("Bedford") Common Stock, par about $0.001 per share (the
"Bedford Shares"), as described more fully in the Offer of Exchange accompanying
this letter. Please follow the instructions in this letter in order to exchange
your Bank Shares and receive the benefits of our Offer. Capitalized terms used
herein and not defined herein have the meanings ascribed to them in the Offer of
Exchange. Simply complete and sign page 3 and the Form W-9 and return your
certificate(s) with those documents in the enclosed envelope.
Our Offer will expire at 5:00 p.m., Eastern Time, on the 90th day after
the date of this letter (the "Expiration Date") unless extended. The Offer may
also be terminated or amended by Bedford, in accordance with the terms of the
Offer as set forth in the Offer of Exchange. Bank Shares which are tendered may
be withdrawn at any time prior to the Expiration Date, provided that proper
notice in writing or via telegraph, or facsimile transmission is timely received
by the Exchange Agent listed in this Letter of Transmittal.
Bedford's obligation to exchange the Bedford Shares for Bank Shares
pursuant to the Offer is subject to (i) there being validly tendered and not
withdrawn prior to the expiration date a number of Bank Shares which will
constitute 80% of the outstanding Bank Shares (the "Minimum Tender Condition"),
(ii) the representations and warranties of Bank contained in the Exchange
Agreement (as defined herein) being true and correct on the Expiration Date and
related closing date, and (iii) the satisfaction of other conditions set forth
in the Exchange Agreement.
Bedford will accept for exchange all validly tendered Bank Shares,
For further information or assistance regarding our Offer please call
our representatives listed on the back.
Thank you for your time and assistance in this matter.
Sincerely,
Bedford Holdings, Inc.
<PAGE>
BANK SHAREHOLDER REPRESENTATIONS
The Bank Shareholder executing the Letter of Transmittal, or on whose
behalf the Letter of Transmittal is executed (the "Tendering Bank Shareholder"),
hereby makes the following representations and warranties:
1. The Tendering Bank Shareholder acknowledges receipt of the Bedford
Offer of Exchange dated March 16, 1999 (the "Offer of Exchange") relating to the
Exchange Offer.
2. Upon the terms and subject to the conditions of the Offer, subject
to, and effective upon, acceptance of the Bank Shares tendered with the Letter
of Transmittal in accordance with the terms of the Offer, the Tendering Bank
Shareholder sells, assigns and transfers to, or upon the order of, Bedford, all
right, title and interest in and to all of the Bank Shares that are being
tendered and any and all Bank Shares and other securities issued or issuable in
respect thereof, and irrevocably constitutes and appoints the Exchange Agent the
true and lawful agent and attorney-in-fact of the Tendering Bank Shareholder
with respect to such Bank Shares, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
the full extent of the Tendering Bank Shareholder's rights with respect to such
Bank Shares, to present such Bank Shares for transfer on the books of Bank and
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Bank Shares all in accordance with the terms and the conditions of the
Offer.
3. The Tendering Bank Shareholder has full power and authority to
tender, sell, assign and transfer the Bank Shares tendered and that when the
same are accepted for exchange by Bedford, Bedford will acquire good, marketable
and unencumbered title thereto, free and clear of all liens, restrictions,
claims, charges and encumbrances, and the same will not be subject to any
adverse claim. The Tendering Bank Shareholder will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or Bedford to be
necessary or desirable to complete the sale, assignment, and transfer of the
Bank Shares tendered.
4. All authority conferred or agreed to be conferred pursuant to the
Letter of Transmittal shall not be affected by and shall survive the death or
incapacity of the Tendering Bank Shareholder and any obligation of the Tendering
Bank Shareholder hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the Tendering Bank Shareholder.
Subject to the withdrawal rights set forth under "The Offer--Withdrawal Rights"
in the Offer of Exchange, the tender of Bank Shares made is irrevocable.
5. The Tendering Bank Shareholder understands that tenders of Bank
Shares pursuant to any one of the procedures described under "The
Offer--Procedure for Tendering" in the Offer of Exchange and in the instructions
to the Letter of Transmittal and acceptance of such Bank Shares will constitute
a binding agreement between the Tendering Bank Shareholder and Bedford upon the
terms and subject to the conditions set forth in the Offer.
6. The Tendering Bank Shareholder is not a U.S. person as defined in
Regulation S of the U.S. Securities and Exchange Commission, and is not
acquiring the Bedford Shares for the account of a U.S. person, and agrees to
resell the Bedford Shares only in accordance with the
2
<PAGE>
Provisions of Regulation S, pursuant to registration under the Securities Act of
1933, as amended, or pursuant to an available exemption from registration, and
agrees not to engage in hedging trransactions with regard to such securities
unless in compliance with that Act.
IN ORDER TO TENDER YOUR BANK SHARES, SIMPLY:
1. SIGN BY THE "X" IN THE BOX BELOW AND DATE
2. COMPLETE THE SUBSTITUTE FORM W-8 ACCOMPANYING THIS LETTER.
I certify that I have read the instructions enclosed with and
constituting a part of this Letter of Transmittal and that I comply with the
Bank Shareholder Representation included with such Instructions.
PLEASE SIGN HERE.
x________________________________
Signature(s) of Bank Shareholder(s)
Dated: , 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s). If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 4.)
Name(s)
________________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (Full Title)___________________________________________________________
Address ________________________________________________________________________
City/State _____________________________________________________________________
(Telephone Number) _____________________________________________________________
Complete the box below only if you wish to tender less than all the
Bank Shares evidenced by your certificate(s)
CERTIFICATE NUMBER(S) AND BANK SHARES TENDERED (ATTACH ADDITIONAL LIST IF
NECESSARY)
3
<PAGE>
<TABLE>
<CAPTION>
Total Number of Bank Shares
Evidenced by Certificate(s) Number of Bank Shares Tendered*
Certificate Number(s)
<S> <C> <C>
Total Bank Shares
</TABLE>
* You must indicate if you are tendering less than all Bank Shares
evidenced by any certificate(s) delivered to the Exchange Agent. See Instruction
3.
IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, reporting of income and withholding
of U.S. taxes is required under certain circumstances. A Bank Shareholder
("Holder") who is not a U.S. citizen or resident is not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, that Holder must submit to the Exchange Agent a
properly completed Internal Revenue Service Form W-8 (a "Form W-8"), signed
under penalties of perjury, attesting to that individual's exempt status. A Form
W-8 is enclosed. See the enclosed Form W-8 for additional instructions.
The Exchange Agent for the Offer is:
O'zsanoatqurilishbank
700000 Tashkent, GSP, Abdulla Tukay St. 3
ANY BANK SHAREHOLDER THAT DESIRES TO TENDER BANK SHARES AND WHOSE
CERTIFICATES FOR SUCH BANK SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT
DELIVER ALL REQUIRED DOCUMENTS TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION
DATE, SHOULD CONTACT THE EXCHANGE AGENT IMMEDIATELY AT (3712) 133-34-26.
4
<PAGE>
BEDFORD HOLDINGS, INC.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Delivery of Letter of Transmittal and Certificates. The Letter of Transmittal
is to be used when certificates are to be tendered in the Exchange Offer.
Certificates for all physically tendered Bank Shares ("Bank Share
Certificates"), as well as the Letter of Transmittal or facsimile thereof,
properly completed and duly executed, and any other documents required by the
Letter of Transmittal, must be received by the Exchange Agent at one of its
addresses set forth herein on or prior to the Expiration Date (as defined in the
Offer of Exchange).
The method of delivery of Bank Share Certificates and all other
required documents is at the option and risk of the tendering Bank Shareholder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and
no fractional Bank Shares will be accepted. All tendering Bank Shareholders, by
execution of the Letter of Transmittal (or facsimile thereof) waive any right to
receive any notice of the acceptance of their Bank Shares for exchange.
2. Inadequate Space. If the space provided herein is inadequate, the certificate
numbers and/or the number of Bank Shares should be listed on a separate piece of
paper and returned with the Letter of Transmittal.
3. Partial Tenders. If fewer than all the Bank Shares evidenced by any
certificate submitted are to be tendered, fill in the number of Bank Shares
which are to be tendered in the box on page 4 of the Letter of Transmittal. In
such cases, new certificate(s) for the remainder of the Bank Shares that were
evidenced by your old certificate(s) will be sent to you as soon as practicable
after the Expiration Date. All Bank Shares represented by certificates delivered
to the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
4. Signatures on Letter of Transmittal; Stock Powers and Endorsements. The
signature(s) on the Letter of Transmittal must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Bank Shares tendered are owned of record by two or more
joint owners, all such owners must sign the Letter of Transmittal.
If you wish to tender Bank Shares and have more than one certificate
and those certificates are registered in more than one name, it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations of certificates.
5
<PAGE>
If the Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
Bedford of their authority so to act must be submitted.
5. Stock Transfer Taxes. Bedford will pay or cause to be paid any stock transfer
taxes with respect to the transfer and sale of Bank Shares to it or its order
pursuant to the Offer.
6. Requests for Assistance or Additional Copies. Questions or requests for
assistance may be directed to, or additional copies of the Offer of Exchange,
the Letter of Transmittal and other exchange offer materials may be obtained
from, the Exchange Agent at their its telephone number and/or address set forth
on the back of the Letter of Transmittal.
7. Substitute Form W-8. Each tendering Bank Shareholder is required to provide
the Exchange Agent with a Form W-8 accompanying this Letter of Transmittal. If a
Bank Shareholder fails to provide this form to the Exchange Agent, such
Shareholder may be subject to 31% backup withholding tax.
IMPORTANT: The Letter of Transmittal or a facsimile copy thereof
together with Bank Share certificates and all other required documents) must be
received by the Exchange Agent on or prior to the Expiration Date.
ANY BANK SHAREHOLDER THAT DESIRES TO TENDER BANK SHARES AND WHOSE
CERTIFICATES FOR SUCH BANK SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT
DELIVER ALL REQUIRED DOCUMENTS TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION
DATE, SHOULD CONTACT THE EXCHANGE AGENT IMMEDIATELY AT (800) 829-8432.
6
<PAGE>
Exhibit 3.1
TITLE 14 A: 2-7 New Jersey Business Corporation Act
CERTIFICATE OF INCORPORATION
(For Use by Domestic Profit Corporations)
THIS IS TO CERTIFY THAT, there is hereby organized a corporation under
and by virtue of the above noted Statute of the New Jersey Statutes.
1. Name of Corporation: BEDFORD HOLDINGS, INC.
2. Registered Agent: Corporation Service Company
3. Registered Office: 830 Bear Tavern Road
West Trenton, NJ 08628
4. The purpose(s) for which this corporation is organized is (are) to
engage in any activity within the purpose for which corporation may be organized
under N.J.S.A. 14A:1--1 et seq.
5. The aggregate number of shares which the Corporation shall have the
authority to issue are: 20 million shares at no par value
6. Name and address of the director(s)
NAME STREET ADDRESS CITY STATE ZIP
Leon Zapoll 90 West Street, Suite 615, New York, New York 10006
7. Name and address on incorporator(s)
NAME STREET ADDRESS CITY STATE ZIP
Rene Payne 830 Bear Tavern Road West Trenton, NJ 08628
8. The duration of the Corporation is perpetual.
IN WITNESS WHEREOF, the individual Incorporator being over eighteen
years of age has signed this Certificate this 27th day of June, A. D. 1996.
/s/ Renee Payne
Rene Payne
Incorporator
<PAGE>
Exhibit 3.2
SECRETARY OF STATE
STATE OF NEW JERSEY
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
OF BEDFORD HOLDINGS, INC.
Federal Employer Identification Number.: 13-3901466
Pursuant to the provisions of Section 14 A:9-2(4) and Section
14A:9-4(3), Corporations, General, of the New Jersey Statutes, the undersigned
corporation executes the following Certificate of Amendment to its Certificate
of Incorporation:
1. The name of the Corporation is BEDFORD HOLDINGS, INC.
2. The following amendments to the Certificate of Incorporation were
approved by the directors and thereafter duly adopted by the
shareholders of the corporation on the 22 day of July, 1996:
RESOLVED, that Article 5 of the Certificate of Incorporation be amended
to read as follows:
"5. The aggregate number of shares which the Corporation shall
have authority to issue shall be Forty Million (40,000,000) shares all
of which shall be designated as common stock without par value."
RESOLVED, that Articles 9 and 10 be added to the Certificate of
Incorporation as follows:
"9. The Corporation shall, to the fullest extent permitted by the
New Jersey Business Corporation Act, as the same may be amended and
supplemented, indemnify any and all persons who made shall have power
to indemnify under said Act from and against any and all of the
expenses, liabilities, or other matters referred to indoor covered by
said Act, and the indemnification provided for herein shall not be
deemed exclusive of any other rights to which any person may be
entitled under any By-Law, resolution of shareholders, resolution of
directors, agreement, or otherwise, as permitted by said Act, has to
action in any capacity in which such person surrogate request of the
Corporation."
10. The personal liability of the directors of the Corporation is
eliminated to the fullest extent permitted by the provisions of the New
Jersey Business Corporation Act, as the same may be amended and
supplemented."
3. The number of shares outstanding at the time of the adoption of the
amendment was 20,000,000. The total number of shares entitled to vote
thereon was 20,000,000
<PAGE>
4. The number of shares voting for and against such amendment is as
follows:
Number of Shares Voting Against
NUMBER OF SHARES VOTING FOR AMENDMENT AMENDMENT
20,000,000 -0-
Dated this 29 day of July, 1996
Bedford Holdings, Inc.
By: /s/ Leon Zapoll
----------------------
Leon Zapoll, President
<PAGE>
Exhibit 3.3
BY-LAWS
OF
BEDFORD HOLDINGS, INC.
ARTICLE I OFFICES
The registered office of the corporation shall be 36 Wescott St., Old
Tappan, NJ 07675. The registered agent at said office is Leon Zapoll. The
corporation may also have offices at such other places within or without the
State of New Jersey as the board may from time to time determine or the business
of the corporation may require.
ARTICLE II SHAREHOLDERS
1. PLACE OF MEETINGS.
Meeting of shareholders shall be held at the principal office of the
corporation or at such place within or without the State of New Jersey as the
board shall authorize.
2. ANNUAL MEETING.
The annual meeting of the shareholders shall be held on the 15th day of
February at 10 AM. in each year if not a legal holiday, and, if a legal holiday,
then on the next business day following at the same hour, when the shareholders
shall elect a board and transact such other business as may properly come before
the meeting.
3. SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the board or by
the president and shall be called by the president or the secretary at the
request in writing of a majority of the board or at the request in writing by
shareholders owning a majority in amount of the shares issued and outstanding.
Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at a special meeting shall be confined to the purposes
stated in the notice.
4. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written notice of the time, place and purpose or purposes of every
meeting of shareholders shall be given not less than 10 nor more than 60 days
before the date of the meeting, either personally or by mail, to each
shareholder of record entitled to vote at the meeting.
When a meeting is adjourned to another time or place, it shall not be
necessary, unless the by-laws otherwise provide, to give notice of the adjourned
meeting if the time and place to which the meeting is adjourned are announced at
the meeting at which the adjournment is taken and at the adjourned meeting only
such business is transacted as might have been transacted at the original
meeting. However, if after the adjournment the board fixes a new record date for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record on the new record date entitled to notice.
5. WAIVER OF NOTICE OR OF LAPSE OF TIME.
(a) Notice of meeting need not be given to any shareholder who
signs a waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of any
<PAGE>
shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by
him.
(b) Whenever shareholders are authorized to take any action after
the lapse of a prescribed period of time, the action may be
taken without such lapse if such requirement is waived in
writing, in person or by proxy, before or after the taking of
such action, by every shareholder entitled to vote thereon as
at the date of the taking of such action.
6. ACTION BY SHAREHOLDERS WITHOUT A MEETING.
Any action required or permitted to be taken at a meeting of
shareholders by statute, the certificate of incorporation, or by-laws, other
than the annual election of directors, may be taken without a meeting upon the
written consent of shareholders who would have been entitled to cast the minimum
number of votes which would be necessary to authorize such action at a meeting
at which all shareholders entitled to vote thereon were present and voting. The
written consents of the shareholders consenting thereto shall be filed with the
minutes of proceedings of shareholders.
7. QUORUM OF SHAREHOLDERS.
(a) Unless otherwise provided in the certificate of incorporation,
the holders of shares entitled to cast a majority of the votes
at a meeting shall constitute a quorum at such meeting. The
shareholders present in person or by proxy at a duly organized
meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. Less than a quorum may adjourn.
(b) Whenever the holders of any class or series of shares are
entitled to vote separately on a specified item of business,
the provisions of paragraph (a) shall apply in determining the
presence of a quorum of such class or series for the
transaction of such specified item of business.
8. ORDER OF BUSINESS.
The order of business at all meetings of the shareholders shall be as
follows:
(a) Roll call.
(b) Proof of notice of meeting or waiver of notice.
(c) Reading of minutes of preceding meeting.
(d) Reports of offices.
(e) Reports of committees.
(f) Election of inspectors of election.
(g) Election of directors.
(h) Unfinished business.
(i) New business.
2
<PAGE>
ARTICLE III DIRECTORS
1. BOARD OF DIRECTORS.
Subject to any provision in the certificate of incorporation the
business of the corporation shall be managed by its board of directors, each of
whom shall be at least 18 years of age.
2. NUMBER OF DIRECTORS.
The number of directors shall be two.
3. TERM OF DIRECTORS,
The directors named in the certificate of incorporation shall hold
office until the first annual meeting of shareholders, and until their
successors shall have been elected and qualified, At the first annual meeting of
shareholders and at each annual meeting thereafter the shareholders shall elect
directors to hold office until the next succeeding annual meeting, except as
other wise required by the certificate of incorporation or the by-laws in the
case of classification of directors. Each director shall hold office for the
term for which he is elected and until his successor shall have been elected and
qualified. A director may resign by written notice to the corporation. The
resignation shall be effective upon receipt thereof by the corporation or at
such subsequent time as shall be specified in the notice of resignation.
4. VACANCIES AND NEWLY CREATED DIRECTORSHIPS,
(a) Any directorship not filled at the annual meeting and any
vacancy, however caused, occurring in the board may be filled
by the affirmative vote of a majority of the remaining
directors even though less than a quorum of the board, or by a
sole remaining director. A director so elected by the board
shall hold office until the next succeeding annual meeting of
shareholders and until his successor shall have been elected
and qualified.
(b) When one or more directors shall resign from the board
effective at a future date, a majority of the directors then
in office including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to
take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as
herein provided in the filling of other vacancies.
(c) Any directorship to be filled by reason of an increase in the
number of directors shall be filled by election at an annual
meeting or at a special meeting of shareholders called for
that purpose, unless the certificate of incorporation or a
by-law adopted by the shareholders authorizes the board to
fill such directorship. A director elected by the board to
fill any such directorship shall hold office until the next
succeeding annual meeting of shareholders and until his
successor shall have been elected and qualified.
(d) If by reason of death, resignation or other cause the
corporation has no directors in office, any shareholder or the
executor or administrator of a deceased shareholder may call a
special meeting of shareholders for the election of directors
and, over his own signature, shall give notice of said meeting
in accordance with the by-laws.
5. REMOVAL OF DIRECTORS.
3
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One or more or all the directors of a corporation may be removed for
cause by the shareholders by the affirmative vote of the majority of the votes
cast by the holders of shares entitled to vote for the election of directors.
6. QUORUM OF BOARD or DIRECTORS AND COMMITTEES; ACTION OF DIRECTORS WITHOUT A
MEETING.
A majority of the entire board, or of any committee thereof, shall
constitute a quorum for the transaction of business, unless the certificate of
incorporation shall prove that a greater or lesser number shall constitute a
quorum, which in no case shall be less than the greater of two persons or
one-third of the entire board or committee, except that when a board of one
director is authorized one director shall constitute a quorum. Any action
required or permitted to be taken pursuant to authorization voted at a meeting
of the board or any committee thereof, may be taken without a meeting if, prior
or subsequent to such action, all members of the board or of such committee, as
the case may be, consent thereto in writing and such written consents are filed
with the minutes of the proceedings of the board or committee. Such consent
shall have the same effect as a unanimous vote of the board or committee for all
purposes.
7. PLACE OF BOARD MEETINGS.
Meetings of the board may be held either within or without the State of
New Jersey.
8. REGULAR ANNUAL MEETING.
A regular annual meeting of the board shall be held immediately
following the annual meeting of shareholders at the place of such annual meeting
of shareholders.
9. NOTICE OF MEETINGS OF THE BOARD; ADJOURNMENT.
(a) Regular meetings of the board may be held with or without
notice. Special meetings of the board shall be held upon
notice to the directors and may be called by the president
upon three days' notice to each director either personally or
by mail or by wire; special meetings shall be called by the
president or by the secretary in a like manner on written
request of two directors. Notice of any meeting need not be
given to any director who signs a waiver of notice, whether
before or after the meeting, The attendance of any director at
a meeting without protesting prior to the conclusion of the
meeting the lack of notice of such meeting shall constitute a
waiver of notice by him. Neither the business to be transacted
at, nor the purpose of, any meeting of the board need be
specified in the notice or waiver of notice of such meeting.
Notice of an adjourned meeting need not be given if the time
and place are fixed at the meeting adjourning and if the
period of adjournment does not exceed ten days in any one
adjournment.
(b) A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place.
Notice of the adjournment shall be given all directors who
were absent at the time of the adjournment and, unless such
time and place are announced at the meeting, to the other
directors.
10. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution adopted by a majority of the entire board, may
designate from among its members an executive committee and other committees,
each consisting of three or more directors. Each such committee shall serve at
the pleasure of the board.
4
<PAGE>
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their
services, but by resolution of the board a fixed sum and expenses for actual
attendance, at each regular or special meeting of the board may be authorized.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV OFFICERS
1. OFFICES, ELECTION, TERM, SALARIES, SECURITY.
(a) The officers of the corporation shall consist of a president,
a secretary, a treasurer, and, if desired, a chairman of the
board, one or more vice presidents, and such other officers as
the board may determine. The officers shall be elected or
appointed by the board.
(b) Any two or more offices may be held by the same person.
(c) Any officer elected or appointed as herein provided shall hold
office until the next regular meeting of the board following
the annual meeting of shareholders or until a successor is
elected or appointed and has qualified subject to earlier
termination by removal or resignation.
(d) All officers of the corporation, as between themselves and the
corporation, shall have such authority and perform such duties
in the management of the corporation as may be provided in the
by-laws, or as may be determined by resolution of the board
not inconsistent with the by-laws.
(e) The salaries of all officers shall be fixed by the board.
(f) In case the board shall so require, any officer or agent of
the corporation shall execute to the corporation a bond in
such sum and with such surety or sureties as the board may
direct, conditioned upon the faithful performance of his
duties to the corporation and including responsibility for
negligence and for the accounting for all property, funds or
securities of the corporation which may come into his hands.
2. DELEGATION OF DUTIES.
In case of the absence of any officer of the corporation, or for any
other reason that may seem sufficient to the board, the directors may, by a
majority vote of the board, delegate the powers and duties of such officer, for
the time being, to any other officer, or to any director.
3. REMOVAL AND RESIGNATION OF OFFICERS; FILLING OF VACANCIES.
(a) Any officer elected or appointed by the board may be removed
by the board with or without cause. An officer elected by the
shareholders may be removed, with or without cause, only by
vote of the shareholders but his authority to act as an
officer may be suspended by the board for cause.
(b) An officer may resign by written notice to the corporation.
The resignation shall be effective upon receipt thereof by the
corporation or at such subsequent time as shall be specified
in the notice of resignation.
(c) Any vacancy occurring among the officers, however caused may
be filled by election or appointment by the board for the
unexpired term.
5
<PAGE>
4. PRESIDENT.
The president shall be the chief executive officer of the corporation;
he shall preside at all meetings of the shareholders and of the board; he shall
have the management of the business of the corporation and shall see that all
orders and resolutions of the board are carried into effect.
5. VICE PRESIDENTS.
During the absence or disability of the president, the vice president,
or if there are more than one, the executive vice president shall have all the
powers and function of the president. Each vice president shall perform such
other duties as the board shall prescribe.
6. SECRETARY.
The secretary shall: attend all meeting of the board and of the
shareholders; record all votes and minutes of all proceedings in a book to be
kept for that purpose; give or cause to be given notice of all meetings of
shareholders and of the special meeting of the board; keep in safe custody the
seal of the corporation and affix it to any instrument when authorized by the
board; when required, prepare a list of shareholders or cause to be prepared and
available at each meeting of shareholders entitled to vote thereat, indicating
the number of shares of each respective class held by each; keep all the
documents and records of the corporation as required by law or otherwise in a
proper and safe manner; and perform such other duties as may be prescribed by
the board.
7. ASSISTANT SECRETARIES.
During the absence or disability of the secretary, the assistant
secretary, or if there are more than one, the one so designated by the secretary
or by the board, shall have all the powers and functions of the secretary.
8. TREASURER.
The treasurer shall: have the custody of the corporate funds and
securities; keep full and accurate accounts of receipts and disbursements in the
corporate books; deposit all money and other valuables in the name and to the
credit of the corporation in such depositories as may be designated by the
board; disburse the funds of the corporation as may be ordered or authorized by
the board and preserve proper vouchers for such disbursements; render to the
president and board at the regular meetings of the board, or whenever they
require it, an account of all his transactions as treasurer and of the financial
condition of the corporation; render a full financial report at the annual
meeting of the shareholders if so requested; be furnished by all corporate
officers and agents at his request, with such reports and statements as he may
require as to all financial transactions of the corporation; and perform such
other duties as are given to him by the by-laws or as from time to time are
assigned to him by the board or the president.
9. ASSISTANT TREASURER.
During the absence or disability of the treasurer, the assistant
treasurer, or if there are more than one, the one so designated by the secretary
or by the board, shall have all the powers and functions of the treasurer.
ARTICLE V CERTIFICATES FOR SHARES AND DIVIDENDS
1. CERTIFICATES REPRESENTING SHARES.
6
<PAGE>
The shares of the corporation shall be represented by certificates
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board, or the president or a vice president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation and shall be sealed with the seal of the corporation or a facsimile
thereof.
2. LOST OR DESTROYED CERTIFICATES.
The board may direct a new certificate or certificates to be issued in
place of any certificate or certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
give the corporation a bond in such sum and with such surety or sureties as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
3. TRANSFER OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation
to issue a new certificate to the person entitled thereto, and
cancel the old certificate; every such transfer shall be
entered on the transfer book of the corporation which shall be
kept at its principal office. No transfer shall be made within
ten days next preceding the annual meeting of shareholders. If
the shares evidenced by a certificate presented for transfer
are "restricted securities" as defined in Rule 144 of the
Securities and Exchange Commission under the Securities Act of
1933, as amended, or otherwise may not be sold about
registration under such Act, the corporation shall not
transfer such shares until it has received an opinion of
counsel, or other evidence reasonably satisfactory to it, that
the transfer does not require registration under such Act.
(b) The corporation shall be entitled to treat the holder of
record of any share as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any
other person whether or not it shall have express or other
notice thereof, except as expressly provided by New Jersey
statutes.
4. CLOSING TRANSFER BOOKS.
The board shall have the power to close the share transfer books of the
corporation for a period of not more than ten days during the thirty-day period
immediately preceding (a) any shareholders' meeting, or (b) any date upon which
shareholders shall be called upon to or have a right to take action without a
meeting, or (c) any date fixed for the payment of a dividend or any other form
of distribution, and only those shareholders of record at the time the transfer
books are closed, shall be recognized as such for the purpose of (a) receiving
notice of or voting at such meeting, or (b) allowing them to take appropriate
action, or (c) entitling them to receive any dividend or other form or
distribution.
5. DIVIDENDS.
7
<PAGE>
(a) Subject to the provisions of the certificate of incorporation
and to applicable law, the corporation may, from time to time,
by action of its board, declare and pay dividends or make
other distribution on its outstanding shares in cash or in its
own shares or in its bonds or other property, including the
shares or bonds of other corporations, except when the
corporation is insolvent or would thereby be made insolvent.
(b) Dividends may be declared or paid and other distributions may
be made out of surplus only, except as otherwise provided by
statute.
ARTICLE VI CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name
of the corporation, the year of its organization and the words "Corporate Seal,
New Jersey." The seal may be used by causing it to be impressed directly on the
instrument or writing to be sealed, or upon adhesive substance affixed thereto.
The seal on the certificates for shares or on any corporate obligation for the
payment of money may be a facsimile, engraved or printed.
ARTICLE VII FISCAL YEAR
The fiscal year shall begin as determined by the accountants for the
corporation.
ARTICLE VIII BYLAW CHANGES
AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS.
(a) Except as otherwise provided in the certificate of
incorporation the by-laws may be amended, repealed or adopted
by vote of the holders of the shares at the time entitled to
vote in the election of any directors. By-laws may also be
amended, repealed or adopted by the board but any by-law
adopted by the board may be amended by the shareholders
entitled to vote thereon.
(b) If any by-law regulating an impending election of directors is
adopted, amended or repealed by the board, there shall be set
forth in the notice of the next meeting of shareholders for
the election of directors the by-law so adopted, amended or
repealed, together with a concise statement of the changes
made.
8
<PAGE>
Exhibit 21
LIST OF SUBSIDIARIES
Allen & Pierce Securities, Inc., a New Jersey corporation
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated March 7, 1999 in the Form
10-SB (General Form for Registration of Securities of Small Business Issuers) of
Bedford Holdings, Inc.
Donahue Associates, Inc.
By:
---------------------------
Brian Donahue
New York, New York
March 7, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
BALANCE SHEETS OF BEDFORD HOLDINGS INC. AS OF DECEMBER 31, 1998 AND DECEMBER 31,
1997 AND FOR EACH OF THE FISCAL YEARS THEN ENDED, INCLUDED IN THE FORM 10-SB OF
THAT CORPORATION, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 1,760,372 40,982
<RECEIVABLES> 66,796 15,295
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 38,010 50,144
<TOTAL-ASSETS> 1,879,229 296,168
<SHORT-TERM> 0 0
<PAYABLES> 0 0
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 21,200 21,200
<OTHER-SE> (341,907) 262,450
<TOTAL-LIABILITY-AND-EQUITY> 1,879,229 296,168
<TRADING-REVENUE> (220,216) (254,581)
<INTEREST-DIVIDENDS> 1,205 26,681
<COMMISSIONS> 0 348,480
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 32,300 22,100
<INCOME-PRETAX> (603,857) (240,328)
<INCOME-PRE-EXTRAORDINARY> (603,857) (240,328)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (603,857) (240,328)
<EPS-PRIMARY> (0.02) (0.01)
<EPS-DILUTED> (0.02) (0.01)
</TABLE>
