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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
BEACON LIGHT HOLDING CORPORATION
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(Name of Small Business Issuer in its Charter)
NEVADA 06-1519079
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
100 Pearl Street - 14th Floor, Hartford, Connecticut 06103
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(Address of Principal Executive Offices) (Zip Code)
(860) 249-7008
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(Issuer's Telephone Number)
Securities to be registered pursuant to Section 12(g) of the Act:
Title of each class Name of Each Exchange on Which
To be so Registered Each Class is to be Registered
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
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Title of Class)
Preferred Stock, $.001 Par Value
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(Title of Class)
<PAGE> 1
BEACON LIGHT HOLDING CORPORATION
FORM 10SB
DESCRIPTION SUBMISSION PAGE
PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 13
ITEM 3. DESCRIPTION OF PROPERTY 17
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 18
ITEM 5. DIRECTORS, EXCEUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS OWNING MORE THAN 10% 20
ITEM 6. EXECUTIVE COMPENSATION 21
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 25
ITEM 8. DESCRIPTION OF SECURITIES 28
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS 30
ITEM 2. LEGAL PROCEEDINGS 31
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 31
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES 31
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS 33
PART F/S 37
PART III
ITEM 1. INDEX TO EXHIBITS 81
ITEM 2. DESCRIPTION OF EXHIBITS 81
SIGNATURES 82
EX-3.1 ARTICLES OF INCORPORATION - IDAHO 83
EX-3.1(i) AMENDED ARTICLES OF INCORPORATION 89
EX-3.1(ii) ARTICLES OF INCORPORATION - NEVADA 91
EX-3.1(iii) ARTICLES OF MERGER 93
EX-3.1(iv) AMENDED ARTICLES OF INCORPORATION 100
EX-3.1(v) AMENDED ARTICLES OF INCORPORATION 101
EX-3.2 BY-LAWS 102
EX-3.2(i) AMENDMENT TO BY-LAWS 115
EX-4.1 FORM OF COMMON STOCK CERTICICATE 116
EX-4.1(i) CERTIFICATE OF DESIGNATION 117
EX-10-1 STOCK OPTION PLAN 130
EX-10-2 EMPLOYMENT AGREEMENT - JERRY GRUENBAUM 138
EX-10-3 EMPLOYMENT AGREEMENT - HANS LODDERS 144
EX-10-4 EMPLOYMENT AGREEMENT - RONALD STEENBERGEN 150
EX-10.5 ACQUISITION AGREEMENT - CASIN 156
EX-10.6 ACQUISITION AGREEMENT - WELLUX 158
EX-10.7 ACQUISITION AGREEMENT - KLICK 169
EX-10.8 LETTER OF INTENT - HONGTEX HONG KONG 181
EX-10.9 LIST OF SUBSIDIARIES OF REGISTRANT 184
EX-23.1 CONSENT OF HOFFSKI & PISANO 185
EX-23.1(i) CONSENT OF RAYMOND CHING & CO. 186
EX-27.1 FINANCIAL DATA SCHEDULE 187
<PAGE> 2
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART 1
ITEM 1. DESCRIPTION OF BUSINESS.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this section and elsewhere in this
registration statement regarding matters that are not historical facts are
"forward-looking statements". Because such forward-looking statements include
risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. All statements, which
address operating performance, events or developments that our management
expects or anticipates to incur in the future, including statements relating to
sales and earnings growth or statements expressing general optimism about future
operating results, are forward-looking statements. These forward-looking
statements are based on our management's current view and assumptions regarding
future events and operating performance. Many factors could cause actual
results to differ materially from estimates contained in our management's
forward-looking statements. The differences may be caused by a variety of
factors, including but not limited to adverse economic conditions, competitive
pressures, inadequate capital, unexpected costs, lower revenues, net income and
forecasts, the possibility of fluctuation and volatility of our operating
results and financial condition, inability to carry out marketing and sales
plans and loss of key executives, among other things.
Throughout this registration statement, we refer to United States dollars
as "$" and to Hong Kong dollars as "HK$."
THE COMPANY
We are a Nevada corporation, reincorporated on November 18, 1997, as Beacon
Light Mining Company Inc. ("Beacon Light"). On February 18, 1998, we changed
our name to Beacon Light Holding Corporation. We were originally incorporated
in the State of Idaho on April 16, 1953. Our previous activities concentrated
on exploration and development of potential silver mining properties in the
northern part of the State of Idaho. We became inactive from the mid 1980's
until mid 1997. On February 16, 1998, we merged our 1953 Idaho corporation into
Beacon Light, our Nevada corporation.
We originally went public in the 1950s on a Regulation A offering. Subsequently
our stock was trading on the Spokane Exchange. The Spokane Exchange is now
defunct. Our Company's listing on the Spokane Exchange has also since lapsed.
In April 1997, Ansam, Inc. of Jersey City, New Jersey purchased a majority
control of our Company and changed our direction from silver mining to a holding
company for manufacturing operations in China. Ansam, Inc. is no longer a
shareholder in our Company. In June 1997, we submitted our application to
NASDAQ, and in September, 1997, our Company was accepted on the Electronic
Bulletin Board. In October 1999 we were removed from the Electronic Bulletin
Board for failure to file the necessary paperwork to be a fully reporting
company. Our common stock currently trades on a limited basis on the National
Quotation Bureau's "Pink Sheets" under the symbol "BLHG" and we currently intend
to reapply to have our Common Stock quoted on the Over-the-Counter Bulletin
Board upon meeting the requirements of its "Eligibility Rules".
<PAGE> 3
We are headquartered in the United States in Hartford, Connecticut. Our Company
consists of two divisions, both of whom are based in Hong Kong. Our first
division is Wellux Industries Ltd., a Hong Kong corporation, which sources,
designs and manufactures adult products made from various forms of plastics,
lingerie and leather goods. In Europe, Wellux products are sold and distributed
by Wellux B.V., a Dutch company, located in Holland. This company is a wholly
owned subsidiary of Wellux Industries Ltd. Wellux BV also owns VJMA Roosen, a
Dutch Company, specializing in product design, development, packaging and
marketing of quality cookware and high end cutlery. Our second division is a
49% interest in Klick Ltd., a Hong Kong Corporation, which sources, designs and
manufactures high quality plastic household products, as well as household
electronic, cutlery and cookware products and sells and distributes these
products in Europe and Asia.
BUSINESS ACTIVITIES
On November 23, 1998 we entered into an agreement with Casin Video Cassette
Ltd. of Hong Kong to purchase its Casin Magnetic Manufactory, a plastics and
light electrical appliance manufacturing company located outside the City of
Shanzhan, in the Peoples Republic of China, about a one hour bus ride from Hong
Kong, for HK$9,480,000 or approximately $1.2 million US Dollars. To date, we
have not closed on this agreement due to the seller's unrelated other legal and
financial problems. We have decided to delay closing on the purchase of this
manufacturing facility until we are able to receive proper legal documentation
from their attorneys that the manufacturing facility will not be encumbered by
any legal claims or become the asset of a possible bankruptcy procedure against
the seller. The complex process is still going ahead in the Peoples Republic of
China. When the process is completed, we plan to complete this acquisition.
On May 18, 1999, we acquired Wellux Industries Ltd. from Crown Union
Investments Ltd., a Hong Kong based holding company, for four million newly
issued Rule 144 restricted common shares of Beacon Light Holding Corporation.
Wellux Industries Ltd. is a Hong Kong Corporation based in Hong Kong that
sources, designs and manufactures adult products made from various forms of
plastics, lingerie and leather goods. Their clients are first line wholesalers
and distributors of these products to the retail sector. The retail sector
consists of adult shops and Internet sales organizations. In some countries,
Wellux sells directly to retail customers through the means of direct sales and
mail order.
In Europe, Wellux products are sold and distributed by Wellux B.V. This
company is a wholly owned subsidiary of Wellux Industries Ltd. It consists of
Wellux B.V. warehouse and physical distribution center, showrooms and offices.
From this center, marketing sales and distribution for the European countries is
undertaken. In the Benelux and Germany, Wellux B.V. sells directly to their
clients, by means of its own sales force. In the other European countries,
agents are appointed, coordinated and supplied by Wellux B.V.
In June 1999, Wellux B.V. (Holland), the wholly owned subsidiary of Wellux
Industries Ltd, which in turn is a wholly owned subsidiary of our Company,
acquired the business and assets without the liabilities of VJMA Roosen from
Victor Roosen, a Dutch citizen, for five hundred thousand newly issued Rule 144
restricted common shares of Beacon Light Holding Corporation. VJMA Roosen is a
Dutch Company, specializing in product design, development, packaging and
marketing of quality cookware and high end cutlery. VJMA Roosen was acquired by
Wellux B.V. because of its synergy in logistics and distribution network in that
it enables them to participate in the European direct sales and wholesale
distribution network.
<PAGE> 4
In July, 1999 we signed a letter of intent to acquire HongTex Holding
Company Limited, a Hong Kong Corporation, for eight million newly issued
restricted common shares of Beacon Light Holding Corporation. HongTex Hong Kong
owns fifty-one percent of Cityford Dying and printing Industrial Limited's
factory in Wuhan, China. The Wuhan Municipal Government owns the other
forty-nine percent of the factory. The factory is one of the major core
enterprises in the textile industry in Wuhan. The factory occupies an area of
approximately 440,000 square feet with a net building area of approximately
243,100 square feet. The factory employs over a thousand employees and has an
annual production capacity of 45 million yards of printed and dyed textile
fabrics. The basic raw material processed at the factory is gray cloth,
purchased mainly from India, Pakistan and China. The manufacturing process
consists of design, printing-form production, pretreatment, printing, dying,
finishing and roll packing.
Due to the need to extract, translate and reformat the Chinese financial
information into general accepted accounting principals, and the rather complex
discussions toward its completion, we still could not finalize our due diligence
process. This in turn has frustrated the conclusion of needed trade facilities
arrangements with the banks. Final activation of this acquisition is subject to
completion of the due diligence to the satisfaction of our Company's Board of
Directors.
In September 1999, Wellux Industries Ltd. our wholly owned subsidiary,
established a new company in joint venture with the publishing group Dimensions
Holding Asia Ltd. called Kiss Mailorder ltd. Under the joint venture
agreement, Wellux holds a fifty percent interest in Kiss Mailorder, which will
be the printed media, mail-order arm of Wellux Industries for the direct
marketing of Wellux's products.
In September 1999, we acquired a forty-nine percent ownership interest in
Klick Ltd., a Hong Kong Corporation, for a soon to be issued two million four
hundred fifty thousand newly issued Rule 144 common shares of Beacon Light
Holding Corporation. We acquired our forty-nine percent ownership interest in
Klick Ltd., thirty percent from Ma Yuk King a Hong Kong resident, fifteen
percent from Drilford Ltd. a Hong Kong Corporation, and four percent from KB
Group, a British Virgin Island Corporation that owns the remaining fifty-one
percent interest. Klick Ltd. located in Hong Kong, does source, design and
manufacture high quality plastic household products, as well as household
electronic, cutlery, and cookware products. Klick's clients consist of
wholesalers, importers, distributors, department stores, retail chains and
direct marketing companies in Europe and Asia. We have an option until
September 16, 2000 to purchase the remaining fifty-one percent interest in Klick
from the KB Group.
DIFFERENTIATION FROM COMPETITION
Most of our competitors from around the world obtain their products at a
significant higher cost than we can obtain similar products because they unlike
us mainly purchase their products through middlemen such as traders and buying
agents in Hong Kong and elsewhere. These results in either their products are
sold into the market for higher prices and/or they are sold at lower profit
margins. We are different from our competitors in that we are physically
located in Hong Kong and are very experienced in direct access to Asian
manufacturers. We are also different from our competitors in that we design and
manufacture many of our own products. In addition, due to our direct access to
the Asian manufacturers, and a direct link to our customers, we are able to make
effective use of our own changes and design to existing products manufactured to
suit our customers' specific needs. As a result, we are very effective in
<PAGE> 5
redesigning products to comply with quality and legal safety requirements for
the US and European markets. This way we can offer diverse range of products to
consumers through multiple channels of distribution, at very competitive prices
as a result of cost leadership.
An added significant difference from our competitors is that we have a
physical distribution center in the Netherlands, whose port of Rotterdam is the
center for all goods being shipped into Western Europe. Our management teams
consist of Dutch nationals with direct experience into the European markets and
at the same time have a long term understand of the Chinese and Asian markets.
SEASONALITY
Our business activities are not adversely affected by seasonality.
MARKETING STRATEGY
We market our products, directly to our specialist clients, by frequent
offers of new product information or updates via E. mail or fax and our own
sales force. We also attend various trade shows throughout the world
specializing in our products.
EMPLOYEES
We currently employ a total of 39 employees around the world. These
Employees are in the following area:
Beacon Light Holding Corp. Management
United States 1
Hong Kong 2
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Total Corporate 3
==========
Wellux Industries Ltd. (HKG) Management 2
Administration 2
Marketing and sales 2
Manufacturing 16
Logistics 2
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Total Far East 24
==========
Wellux B.V. (Netherlands) Management 2
Administration 3
Marketing and sales 3
Logistics 2
Household Products Division Marketing and sales 2
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Total Europe 12
==========
Total employees 39(1)
==========
Footnote:
(1) With the acquisition of Klick Ltd. (49% interest), there is an
additional 14 employees. These employees are: Management - 1; Administration -
3; Marketing and sales - 7; and Logistics - 3.
<PAGE> 6
INTERNATIONAL MARKETS
Our main active markets for both the consumer goods business and the adult
novelty business are all located in Western Europe, in particularly, in Germany,
Holland, Belgium, France and England. In Asia we distribute through
distributors in Hong Kong, Japan (only the adult novelty business), and India.
We have not expended significantly into the United States market. Our aim long
term is for the United States is to acquire a wholesale distribution
organization.
COMPETITION
The consumer goods business and the adult novelty markets are highly
competitive. Our major competitors in the household consumer goods business
include Supreme Ltd. in Hong Kong and S.N.I.P. in Italy. In the adult novelty
market, our major competitors are Scala of the Netherlands and Top. Co. of the
United States. Competition is primarily based upon unit price, product quality,
reliability, product features and management's reputation for integrity. We
believe that we compete favorably with respect to each of these factors.
PRICING STRATEGY
Our ongoing objective is to establish alliance with our manufacturers in
China and Asia, and during the development and marketing of our products, we
invest significant effort to ensure that our vendors understand our long-term
goals. Due to our long-term purchasing insight and connectivity in China and
Asia, combined with our own manufacturing facility, we have established a
substantial product cost advantage over our competition.
Our management has developed a very unique based pricing strategy that is
likely to continue to produce excellent result in that it takes into account: 1.
The added value potential for the product; 2. Acceptable product life cycle; 3.
Value per container/pallet load; and 4. Minimum service cost risk.
RISK FACTORS
The following risks and uncertainties could affect our operating results
and financial condition and could cause our actual results to differ materially
from our historical results.
POLITICAL, LEGAL, ECONOMIC AND OTHER UNCERTAINTIES OF OPERATIONS IN CHINA AND
HONG KONG.
Our principal operations are located in Hong Kong, formerly a British Crown
Colony. Sovereignty over Hong Kong was transferred on July 1, 1997 to China.
As of that date, Hong Kong became a Special Administrative Region of China. The
National People's Congress of China enacted the Basic Law in 1990 as the
constitution of Hong Kong under China's sovereignty. While we do not believe
that this transfer of sovereignty over Hong Kong to China will have a material
adverse effect on our business, there can be no assurance as to the continued
stability of political, economic or commercial conditions in Hong Kong. Any
instability in Hong Kong could have an adverse impact on our business.
The Hong Kong dollar and the United States dollar have been fixed at
approximately 7.80 Hong Kong dollar to $1.00 since 1983. The Chinese government
has expressed its intention in the 1990 Basic Law to maintain the stability of
the Hong Kong currency after the sovereignty of Hong Kong was transferred to
China. There can be no assurance that this will continue and we could face
increased currency risks if the exchange rate mechanism is changed.
<PAGE> 7
Our manufacturing facilities are located in China and Hong Kong. As a
result, our operations and assets are subject to significant political,
economic, legal and other uncertainties. Change in policies by the Chinese
government that can result in changes in their laws, regulations or their
interpretation, confiscatory taxation, restrictions on imports and sources of
supply, import duties, corruption, currency revaluations or the expropriation of
private enterprise could materially and adversely affect us. Over the past
several years, the Chinese government has pursued economic reform policies
including encouraging private economic activity and greater economic
decentralization. There can be no assurance that the Chinese government will
continue to pursue such policies, that such policies will be successful if
pursued, that such policies will not be significantly changed from time to time
or that business operations in China would not become subject to the risk of
nationalization, which could result in the total loss of investment in that
country. Economic development may be limited as well by their imposition of
austerity measures intended to reduce inflation, the inadequate development of
infrastructure and the potential unavailability of adequate power and water
supplies, transportation and communications. If for any reason we were required
to move our manufacturing operations outside of China, our profitability could
be substantially impaired, our competitiveness and market position would be
materially jeopardized and there can be no assurance that we could continue our
operations.
We currently sell most of our products in the Far East and Europe. We are
however for the future, intending to increase selling our products here in the
United States. China currently enjoys most favored nation trade status, which
provides it with the trading privileges generally available to trading partners
of the United States. Our government annually reconsiders the renewal of
China's most favored trade status. Various interest groups have continuously
urged our government not to renew China's most favored trade status and there
can be no assurance that controversies will not arise that threaten the status
quo involving trade between the United States and China or that our government
will not revoke or refuse to renew China's most favored trade status. In any
of such eventualities, our business could be adversely affected, by among other
things, causing our products in the United States to become more expensive,
which could result in a reduction in the demand for our products by our United
States customers. Trade friction between the United States and China, whether
or not actually affecting our business, could also adversely affect the
prevailing market price of our Common Stock.
The legal system of China relating to foreign investment is both new and
continually evolving, and currently there can be no certainty as to the
application of its laws and regulations in particular instances. China does not
have a comprehensive system of laws. Enforcement of existing laws or agreements
may be sporadic and implementation and interpretation of laws inconsistent. The
Chinese judiciary is relatively inexperienced in enforcing the laws that exist,
leading to a higher than usual degree of uncertainty as to the outcome of any
litigation. Even where adequate law exists in China, it may not be possible to
obtain swift and equitable enforcement of that law.
Recently, several countries in Southeast Asia have experienced a
significant devaluation of their currencies and decline in the value of their
capital markets. In addition, several Asian countries have experienced a number
of bank failures and consolidations. The Company does not believe that the
decline in Southeast Asia will affect the demand for the Company's products,
because virtually all of the Company's products are sold into developed
countries particularly in Western Europe not experiencing these declines.
Moreover, because most of the Company's products are paid for in U.S. Dollars or
German Marks, the Company believes that it is less susceptible to the effects of
a devaluation in the Hong Kong dollar or Chinese renminbi if either or both were
<PAGE> 8
to occur despite assurances to the contrary by the Chinese government. However,
the decline in the currencies of other Southeast Asian countries could render
the Company's products less competitive if competitors located in these
countries are able to manufacture competitive products at a lower effective
cost.
RISK FACTS RELATING TO THE BUSINESS OF THE COMPANY
UNCERTAINTY OF ADDITIONAL CAPITAL
To the extent that available funds from operations are insufficient in
order to fully market and upgrade our products, we will need to raise additional
capital either through the sale of our securities of debt securities in private
or public financing. No assurance can be given that additional financing will
be available or that, if available, it can be obtained on terms favorable to the
Company and its stockholders. Failure to obtain such financing could delay or
prevent our planned expansion, which could adversely affect the Company's
business, financial condition and results of operations.
DEPENDENCE ON MAJOR CUSTOMERS
We are not overly dependent on a small number of major customers. The
total number of active customers for Klick's household products amount to 26
importers and traders. Wellux Industries has 230 active customers throughout
the world for its adult oriented products.
DEPENDENCE ON KEY PERSONNEL
We are highly dependent on three key members of our management, sales and
marketing team, Jerry Gruenbaum, Hans Lodders and Ronald Steenbergen. The loss
of the services of one or more of our team may adversely affect our ability to
achieve our business plan. Recruiting and retraining qualified personnel to
carry out our development and technical support will be critical to our future
success. To the extent that the services of Mr. Gruenbaum, Mr. Lodders or Mr.
Steenbergen would not be available to us, we would be required to obtain other
personnel to perform the duties that they otherwise would perform. We cannot be
sure that we will be able to employ other qualified persons, with the
appropriate background and expertise, to replace any of them on acceptable
terms. Although we believe that we will continue to be successful in attracting
and recruiting other skilled personnel, we can offer no assurance that we can
accomplish this objective on acceptable terms. Each management employment
contract contains a non-compete clause.
EARLY-STAGE COMPANY
In mid 1997, the focus of our Company shifted to manufacturing operations
in China. Given this shift in our business focus from silver mining
exploration, even though we as a Company have been around since 1953, we are at
an early stage of entering the commercial marketplace. As a result, we can
provide only limited financial information upon which a prospective investor
could make an evaluation to purchase or sell our securities. Our future
operating results are subject to a number of risks, including our abilities to
implement our strategic plan, to attract qualified personnel and to raise
sufficient financing as required. Our management's inability to guide growth
effectively (including implementing appropriate procedures and controls) could
have an adverse effect on our financial condition and operating results.
<PAGE> 9
MANAGEMENT OF RAPID GROWTH AND LIMITED OPERATING EXPERIENCE
We anticipate that the management of rapid growth will be a key challenge.
Failure to effectively meet this challenge could have a material adverse effect
on our operating results. There is no assurance that, in the event our business
grows rapidly, that we will be able to manage such growth successfully.
NO PATENT PROTECTION
We do not have and do not intend to apply for patents on our products.
Management believes that the patent application process in many countries in
which we intend to sell products would be time - consuming and expensive. In
addition, patents would have the effect of publicizing the proprietary aspects
of our products. Finally, we intend continually to improve and upgrade our
products. As a consequence, any patent disclosure may be out of date by the
time the patent is granted.
DEPENDENCE ON SUPPLIERS
We are not dependent on a small number of suppliers because we own a
significant amount of the "tools/mold" that are needed in the manufacturing of
household and adult products. Hence we are very flexible in choosing a supplier.
SHARES ELIGIBLE FOR FUTURE SALE
As of February 4, 2000 we had outstanding approximately 23,465,589 common
share equivalent, consisting of 19,913,922 shares of Common Stock ("Common
Stock") and 3,551,667 shares of Common Stock issuable on conversion of all
outstanding Exchangeable Shares. Said 3,551,667 shares consist of 1,785,000
options pursuant to our Fiscal 2000 Stock Option Plan, 1,000,000 options granted
to Lloyd Wade Securities on April 13, 1998, and 766,667 convertible Preferred
Class B shares at 1 for 1.
In addition, we have an additional authorized and not issued to date
2,450,000 restricted securities for the Klick Limited acquisition. We have an
additional 500,000 restricted securities for Hans Lodders and 500,000 restricted
securities for Ronald Steenbergen in accordance with their employment agreement.
See Item 8-"Decription of Securities".
Of the 19,913,922 Common Stock, 11,686,422 are freely tradable. The
remaining outstanding shares have not been registered under the Securities Act
and therefore will be treated as "restricted securities" and may be publicly
sold in the United States only if registered or if the sale is made in
accordance with an exemption from registration, such as Rule 144 under the
Securities Act. Under these exemptions, however, approximately one half of the
other 8,227,500 shares of Common Stock generally will be eligible for resale in
the United States without registration one year from the date of issuance the
balance within two year from the date of issuance. This may adversely affect
the market price of our shares and could affect the amount of trading of such
shares.
We intend to register under the Securities Act the shares of our Common
Stock reserved for issuance under the Fiscal 1999 Stock Option Plan. As of
February 4, 2000, options to purchase an aggregate of 1,785,000 shares of Common
Stock were outstanding under such Stock Option Plan. Upon such registration,
such shares, when issued, generally will be freely tradable.
<PAGE> 10
Sale of significant number of such shares, or the perception that such
sales could occur, could adversely affect prevailing market prices for the
shares and could impair our future ability to raise capital through an offering
of equity securities, which in turn could adversely affect our business or
results of operation.
UNFORESEEABLE EVENTS AND CONDITIONS
Unforeseeable events and conditions, many of which are outside our control,
can impact our business. There can be no assurance that our operations will not
be adversely affected by unforeseeable future events.
GOVERNMENT REGULATION
Our business is subject to various federal, state, local and international
government regulations. While due to cultural and religious restrictions, we
cannot be active with our adult product division in certain parts of the world.
MINIMAL TRADING HISTORY OF COMMON STOCK - POSSIBLE STOCK PRICE VOLATILITY
Our Common Stock trades on a limited basis on the National Quotation
Bureau's "Pink Sheets" and we currently intend to apply to have our Common Stock
quoted on the Over-the-Counter Bulletin Board upon meeting the requirements of
its "Eligibility Rules". The market price of the Common Stock could fluctuate
substantially due to a variety of factors, including market perception of our
ability to achieve our planned growth, quarterly operating results of the Issuer
or other similar companies, the trading volume in our Common Stock, changes in
general conditions in the economy, the financial markets or other developments
affecting us or our competitors. In addition, the stock market is subject to
extreme price and volume fluctuations. This volatility has had a significant
effect on the market prices of securities issued by many companies for reasons
unrelated to their operating performance.
LIMITATION ON OFFICERS' AND DIRECTORS' LIABILITIES UNDER NEVADA LAW.
Our by laws provides that the Issuer shall indemnify any officer or
director to the full extent permitted by law. In general, the Nevada Business
Corporation Act permits indemnification of officers and directors in those
instances where the officer or director acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his or her conduct was unlawful. As a result, we
may pay the judgment or other settlement received by a plaintiff against one of
our officers, directors, employees or consultants as well as their legal
expenses. This result could constitute a risk to the shareholders.
PENNY STOCK REGULATION
Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on Nasdaq provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system).
<PAGE> 11
The penny stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer also must provide the customer
with current bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in connection with the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If our securities become subject to the penny stock rules,
investors may find it more difficult to sell their securities.
YEAR 2000 ISSUES
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any computer
software program or hardware that has date-sensitive software of embedded chips
may recognize a date using "00" as the year 1900 rather than the year 2000 which
could result in system failures or miscalculations causing disruptions to
operations and normal business activities. While our computers and software are
all Year 2000 compliant and we have not been affected by any Year 2000 impact
with connection with any of our suppliers or customers, we cannot guarantee that
we have eliminated all risks related to the Year 2000 issue.
SIGNIFICANT CUSTOMERS
Our significant customers in Klick's household product division is: Thomas
Philips GmBh in Germany, Edco B.V. in the Netherlands and KB Trading Comp. In
the United Kingdom. KB Trading Comp. is part of the KB Group from whom we
purchased four percent of Klick Ltd. and who owns the remaining fifty one
percent of Klick Ltd. from whom we have a one year option, starting September
1999, to purchase it.
Our significant customers in Wellux's adult product division is: Scala of
the Netherlands, Orion of Germany, and T.G.A., of the United Kingdom.
LICENSES, PATENTS AND TRADEMARKS
None.
EMPLOYEES
As of February 4, 2000, we had 39 employees (1), one in the United States,
twenty-four in the Far East, and twelve in Europe.
Footnote:
(1) With the acquisition of Klick Ltd. (49% interest), there is an
additional 14 employees, all in the Far East.
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------- -------------------------------------------------------------------
RESULTS OF OPERATION.
-----------------------
This section contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under Item 1 - "Risk Factors." The following
Management Discussion and Analysis of Financial Condition is qualified by
reference to and should be read in conjunction with, our Consolidated Financial
Statements and the Notes thereto as set forth beginning on page F-I.
OVERVIEW
We derive our revenues principally from the sale of adult products made from
various forms of plastics, lingerie and leather goods, and from the sale of
quality household products, household electronics, cutlery, and cookware
products manufactured in the Far East, primarily in China and Hong Kong. For the
six months ended December 31, 1999, the Company had gross sales of $1,986,360
and net income/(Loss) before taxation of ($70,373). For fiscal year ended June
30, 1999, the Company had gross sales of $4,109,017 and net income before
taxation and other income/(expenses) of ($28,807) and net income after other
income/(expenses) of ($158,807). For fiscal year ended June 30, 1998, the
Company had gross sales of $274,468 and net income before taxation and other
income/(expenses) of ($117,348) and net income after other income/ (Expenses) of
($60,000).
Our Company is operating at less than full capacity and is poised to increase
sales in the coming year and thereby improve its margins and financial
performance. We anticipate substantial growth in the business activities of
Wellux. Increased revenue and net income in future periods will depend on our
ability to (i) strengthen our customer base by enhancing and diversifying our
products; (ii) increase the number of our customers; (iii) expand into
additional markets; (iv) maintain or increase sales of our products to existing
customers; (v) increase production; and (vi) control all of our costs. Although
labor costs are increasing in China, our Company's labor costs continue to
represent a relatively small percentage of its total production costs.
Management believes that increased labor costs in China will not have
significant effect on our total production costs or results of operations. In
addition, we have not experienced significant difficulties in obtaining raw
materials for our products, and management does not anticipate any such
difficulties in the foreseeable future.
As of the date of filing this Form 10SB, our Company's revenues for the six
month ended December 31, 1999 have increased when compared to the comparable
period in the prior year. Our Company's principal source of revenue consisted of
the business activities of Wellux Hong Kong, our wholly owned subsidiary, which
totaled $1,986,360. Operating expenses for the six months ended December 31,
1999, consisted of general expenses of $895,504 for our Company as a whole. Our
Company, and our subsidiaries, had a net income/(Loss) of ($70,373)for the six
months ended December 31, 1999.
During fiscal year ended June 30, 1999, our Company raised approximately
$200,650 in cash through the sale of our common stock in an offering conducted
under Rule 504 of Regulation D. During the six-month period ended December 31,
1999 we raised approximately $199,985 in cash through the sale of our common
stock in an offering conducted under Rule 504 of Regulation D, and an
<PAGE> 13
additional $110,000 in cash through the sale of our preferred stock in an
offering conducted under Rule 506 of Regulation D. We anticipate that most, if
not all, of any acquisitions we may make during the next twelve months would be
of operating entities that have employees, or of assets that have employees
associated with such assets. Accordingly, we anticipate there would be a
significant increase in the number of our employees at the operating unit or
subsidiary level, at such time, if any, that acquisitions may be consummated.
Readers are cautioned that there can be no assurance that our management will
be successful in achieving these objectives.
RESULTS OF OPERATIONS
The following table sets forth-selected income data as a percentage of gross
sales for the periods indicated.
<TABLE>
Year ended Year ended Six Months ended
Income Statement Data 6/30/98 6/30/99 12/31/99
------------ ------------ -------------
<C> <S> <S> <S>
Gross sales 100.00% 100.00% 100.00%
Cost of Sales 73.18% 58.21% 58.45%
Gross Profit 26.82% 41.79% 41.55%
Gen. and Admin. Expenses 69.58% 42.49% 45.08%
Income from Operations (42.75%) (0.70%) (3.54%)
Loss on discontinued
operations (21.86%) (3.16%) -
Net Income after
Other income/(expenses) (64.64%) (3.86%) (3.54%)
Provision for Income Taxes 0.09% 0.01% 0.01%
Net Income/(Loss) (64.71%) (3.87%) (3.54%)
</TABLE>
COMPARING FISCAL YEAR ENDED JUNE 30, 1999 TO JUNE 30, 1998
GROSS SALES. The Company's gross sales increases nearly 1,500% from $274,468
for the fiscal year ended June 30, 1998 to $4,109,017 for the fiscal year ended
June 30, 1999, primarily as a result the increase presence of Wellux Industries
in the global markets.
GROSS MARGIN. Gross Margin increased from 26.82% for fiscal year ended June 30,
1998 to 41.79% for fiscal year ended June 30, 1999 primarily due to the fact
that we were able to control fixed costs as gross sales increased dramatically.
Implementation of a "just-in-time" inventory system, which resulted in a
reduction in inventory, also contributed to this increase.
GENERAL AND ADMINISTRATIVE EXPENSES. While total general and administrative
expenses have increased significantly from $190,963 for the fiscal year ended
June 30, 1998 to $1,7017,293 for the fiscal year ended June 30, 1999, they have
decrease as a percentage of gross sales. General and administrative expenses
decreased as a percentage of gross sales from 69.58% for fiscal year ended June
<PAGE> 14
30, 1998 to 42.49% for fiscal year ended June 30, 1999. In addition, in fiscal
year ended June 30, 1998 and June 30, 1999 we incurred significant travel and
entertainment expenses in our quest to enter the Far East market. Now that we
have established our operations and management in the Far East, and the fact
that our directors, Hans Lodders and Ronald Steenbergen reside in Hong Kong, has
resulted in a significant decrease in our travel and entertainment expenses.
INCOME/(LOSS) FROM OPERATIONS. Losses from operation have decreased from
$117,348 or 42.75% of gross sales for the fiscal year ended June 30, 1998 to
$28,807 or 0.70% of gross sales for the fiscal year ended June 30, 1999.
OTHER INCOME/(LOSS). In fiscal year ended June 30, 1999, we wrote off $130,000
from our joint venture in Xinhui, Peoples Republic of China. We were unable to
make the factory profitable as a result of various disagreements with our
partner in the joint venture. We made a business decision to close that
operation.
NET INCOME/(LOSS). Net Losses have decreased from $177,598 or 64.71% of gross
sales for the fiscal year ended June 30, 1998 to $159,057 or 3.87% of gross
sales for the fiscal year ended June 30, 1999. A significant percentage of the
net loss is attributable to loss from the write-off of discontinued operations
noted above in other loss. The discontinued operation write-off accounted for
33.78% of the net loss for fiscal year ended June 30, 1998 and for 81.73% of the
net loss for fiscal year ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have traditionally relied on internally generated funds and trade credits to
meet our working capital requirements. We have in place in Hong Kong, trade
facilities that include the ability to obtain overdrafts, letters of credit,
notes payable and fixed loans. Interest on the indebtedness fluctuates with the
prime rate and HIBOR as set by the Hong Kong Banking Association. Our bank
credit facilities are due for renewal annually. Our Management anticipates that
the banking facilities will be renewed on substantially the same terms.
We believe that present operations may require that we obtain some additional
capital during the next twelve months for our own operation. Wellux Hong Kong
and Klick Ltd. will require the formation of a working line of credit in excess
to the funds to enable these companies to meet their growth plans. Wellux and
Klick have made, to the best of management's belief, positive steps toward
securing it's financing for expansion once our shares are fully trading again on
the NASD Bulletin Board. Additionally, we are seeking additional funding,
through a private placement in Europe and Hong Kong, to increase our working
capital and capital for expansion for Wellux. It is unknown at this time
whether we will be successful in raising capital on reasonable terms.
IMPACT OF INFLATION
Our management believes that inflation has not had a material effect on our
business for six months ended December 31, 1999 or for fiscal year ended June
30, 1999 and 1998. We have generally been able to modify and improve our product
designs so that we could either increase the price of our products or lower the
production cost in order to keep pace with inflation. Most of our manufacturing
is being done in China, and China is experiencing deflation. If such trend
continues, we could incur decreased labor costs with regard to our Chinese
operations, resulting in lower production costs. Although the costs to our
Company of components used in the manufacture of our products have been
relatively stable, management believes that any possible significant increase in
<PAGE> 15
material costs would affect the entire household products and plastics industry
and thus would not have a negative impact on our competitive position.
EXCHANGE RATES
We sell most of our products to international customers. Our principal export
markets are Europe (mainly western Europe) and Asia. Sales to international
customers are made directly from us to our customers. We sell nearly all our
products in United States and Hong Kong Dollars. Because the Hong Kong dollar
is pegged to the United States dollar, we see no material foreign exchange risk
to our Company. We do not currently engage in hedging transactions, and do not
intend to do so in the future.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued certain pronouncements that
are effective as indicated below with respect to the fiscal years presented in
the consolidated financial statements.
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. This statement
establishes guidelines for the reporting and display of comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. It requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displays with
the same prominence as other financial statements; it does not address issues of
recognition of measurement. The primary element of comprehensive income
applicable our Company is the foreign currency cumulative transaction
adjustment. The adoption of SFAS No. 130 will have no impact on our
consolidated results of operations, financial position or cash flows.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial for earlier periods provided for comparative
purposes is required. This statement establishes guidelines for the way the
public business enterprises report information about operating segments in
financial statements. This statement also establishes guidelines for related
disclosures about products and services, geographic areas and major customers.
We have evaluated the disclosure requirements of SFAS No. 131 and believe the
adoption will not have a material impact on our future disclosure requirements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," is effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required. This statement revises employers' disclosures about pension and
other post-retirement benefit plans. It does not change the measurement or
recognition of those plans. It standardizes the disclosure requirements for
pensions and other post-retirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminate certain
disclosures that are no longer useful. The statement suggests combined formats
for presentation of pension and other post-retirement benefit disclosures. We
have evaluated the disclosure requirements of SFAS No. 132 and believe the
adoption will have no impact on our results of operations and financial
position.
<PAGE> 16
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," is
effective for fiscal years beginning after June 15, 1999. Restatement of
disclosures for earlier periods for comparative purposes is required. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. We have
evaluated the disclosure requirements of SFAS No. 133 and believe that
implementation of the new standard will have no impact on our results of
operations and financial position.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sales by a Mortgage Banking
Enterprise" is effective for This statement amends SFAS 65, "Accounting for
Certain Mortgage Banking Activities" and requires that after the securitization
of mortgage loans held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage-backed securities or other retained
interests based on its ability and intent to sell or hold these investments.
This statement conforms the subsequent accounting for securities retained after
the securitization of mortgage loans by a mortgage banking enterprise with the
subsequent accounting for securities retained after the securitization of other
types of assets by a non-mortgage banking enterprise. We have evaluated the
disclosure requirements of SFAS No. 134 and believes that implementation of the
new standard will have no impact on our results of operations and financial
position.
SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical Correction" is
effective for fiscal years ending after February 15, 1999. Issued in February,
1999, this statement rescinds FASB Statement No. 75 "Deferral of the Effective
Date of Certain Accounting Requirements for Pension Plans of State and Local
Governmental Units." GASB Statement No. 25, "Financial reporting for Defined
Benefit Pension Plans and Note Disclosures for Defined Contribution Plans," was
issued November 1994, and establishes financial reporting standards for defined
benefit pension plans and for the notes to the financial statements of defined
contribution plans of state and local government entities. Statement 75 is,
therefore, no longer needed. This Statement also amends FASB Statement No. 35,
"Accounting and Reporting by Defined Benefit Pension Plan," to exclude from its
scope plans that are sponsored by and provide benefits for the employees of one
or more state and local government units. We have evaluated the disclosure
requirements of SFAS No. 135 and believe the adoption will have no impact on our
results of operations and financial position.
ITEM 3. DESCRIPTION OF PROPERTY.
- -------- --------------------------
Our United States office is located in a shared modern office premises at
100 Pearl Street - 14th Floor, Hartford, Connecticut 06103. The lease, with a
non-affiliated party, expires February 28, 2001 with a right to extend subject
to an advance forty-five day notice by us when and if we intend to leave. Rent
is $1,250 per month base rent plus additions for T-1 access, phone, copies, fax
service, conference room use ands postage.
Klick Ltd. (49% participation) occupies approximately four thousand five
hundred square feet modern office and showroom facility at Enterprise Square,
Tower II, on the fifth floor, units 505-507, 9 Sheung Yuet Road, Kowloon Bay,
Kowloon, Hong Kong. The lease with K.B. Group, the owner of the remaining 51%
interest, expires on July 31, 2004. Rent is $8,700 U.S.D. per month.
<PAGE> 17
Our operating subsidiary, Wellux Ltd., including its adult products
division and its household division, occupies approximately five thousand two
hundred square feet office and showroom facility at Yuen Fat Industrial
Building, Unit 301, 25 Wang Chiu Road, Kowloon Bay, Kowloon, Hong Kong. The
lease with a non-affiliated party, expires January 31, 2001. Rent is $3,000
U.S.D. per month.
Wellux BV a subsidiary of Wellux, occupies approximately twenty eight
thousand square feet modern office, showroom, warehouse, and distribution center
facility at De Grote Beer 13, 'S Hertogenbosh, Holland. The lease with a
non-affiliated party, expires January 1, 2004. Rent is $4,500 U.S.D. per month.
We believe that existing facilities are adequate for our needs through at
least the end of 2000. Should we require additional space at that time, or
prior thereto, we believe that such space can be secured on commercially
reasonable terms and without undue operational disruption.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- ------------------------------------------------------------------
We have set forth in the following table certain information regarding our
common stock beneficially owned on February 4, 2000, for (i) each shareholder we
know to be the beneficial owner of 5% or more of our outstanding common stock,
(ii) each of our executive officers and directors, and (iii) all executive
officers and directors as a group. In general, a person is deemed to be a
"beneficial owner" of a security if that person has or shares the power to vote
or direct the voting of such security, or the power to dispose or to direct the
disposition of such security. A person is also deemed to be a beneficial owner
of any securities of which the person has the right to acquire beneficial
ownership within 60 days.
At February 4, 2000 we have outstanding approximately 23,465,589 common
shares equivalents, consisting of 19,413,922 shares of Common Stock, and
3,551,667 shares of Common Stock issuable upon conversion of all outstanding
Exchangeable Shares. Said 3,551,667 shares consist of 1,785,000 options pursuant
to our Fiscal 2000 Stock Option Plan, 1,000,000 options granted to Lloyd Wade
Securities on April 13, 1998, and 766,667 convertible Preferred Class B shares
at 1 for 1. In addition, we have an additional authorized and not issued to
date 2,450,000 restricted securities for the Klick Limited acquisition and an
additional 500,000 restricted securities for Hans Lodders and 500,000 restricted
securities for Ronald Steenbergen in accordance with their employment agreement.
<PAGE> 18
<TABLE>
NAME AND ADDRESS NUMBER OF SHARES OF COMMON PERCENT OF
OR IDENTITY OF GROUP STOCK BENEFICIALLY OWNED BENEFICIAL OWNERSHIP
- --------------------------------- -------------------------- ---------------------
<S> <C> <C>
Hans Lodders (1)(2)(3)(4) 2,833,333 12.1%
Enterprise Square - Tower II
9 Sheung Yuet Road, Unit 505-507
Kowloon Bay, Kowloon Hong Kong
Ronald Steenbergen (3)(4) 750,000 3.2%
Enterprise Square - Tower II
9 Sheung Yuet Road, Unit 505-507
Kowloon Bay, Kowloon Hong Kong
Jerry Gruenbaum (3)(4)(5) 2,250,000 9.6%
100 Pear Street - 14th Floor
Hartford, CT 06103
All Executive Officers 5,833,333 24.9%
and Directors as a Group
(3 persons)
Lloyd Wade Securities (6) 1,464,000 6.2%
14911 Quorum Drive - Suite 120
Dallas, TX 75240
</TABLE>
Footnotes:
(1) Includes 1,333,333 shares of the 4,000,000 Rule 144 shares that were
paid to Crown Union Investment Limited, a Hong Kong Corporation for the
acquisition of Wellux Industries Ltd on May 18, 1999. One of Crown Union's
shareholders is a Ms. Noortje Vogeltje Lodders, a Dutch citizen, the adult
daughter of Mr. Hans Lodders who controls 1,333,333 shares.
(2) Includes all 750,000 shares of the 2,450,000 Rule 144 shares that are
authorized and are to be paid to Drilford, Ltd., a Hong Kong Corporation for the
acquisition of Klick Ltd. In September 1999. Drilford, Ltd. is owned 80% by Mr.
Lodders' wife and 20% by Mr. Lodders who is also a director.
(3) Includes 500,000 Rule 144 shares paid to each of the officers on January
2, 2000 as compensation per employment agreement. On said date, the shares were
trading for $0.12 per share for freely tradable shares. Given the two year
restriction on transfer of said shares by each of the officers, our board gave a
forty percent value to the share at the time of authorization or $0.05 per share
for a total value of $25,000 to each officer.
(4) Includes 250,000 options awarded to each of the officers on January 2,
2000 as compensation per employment agreement. Said shares are exercisable at
$0.15 per share. On said date, the shares were trading for $0.12 per share for
freely tradable shares.
(5) Includes 1,500,000 Rule 144 shares sold to him on January 2, 20000 for
$0.05 per share for a total of $75,000.00 payable by interest bearing note over
a five-year period. Given the two-year restriction on transfer of said shares,
our board gave a forty percent value to the share at the time of authorization
or $0.05 per share.
(6) Includes 464,000 freely tradable shares plus 1,000,000 options
exercisable at $0.13 as part of a Investment Banking Agreement we entered into
on April 13, 1998.
<PAGE> 19
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
- ------- -------------------------------------------------------------------
The following table sets forth the names, positions and ages of our
executive officers and directors. All our directors serve until the next annual
meeting of shareholders or until their successors are elected and qualify.
Officers are elected by the Board and their term of office are, except to the
extent governed by employment contract, at the discretion of the Board.
<TABLE>
NAME AGE POSITION
- ------------------------------- --- ------------------------------------
<S> <C> <C>
Jerry Gruenbaum 44 President, secretary, treasurer and
a member of the Board of Directors.
Hans Lodders 57 Managing Director of Asia Business
Division and Chairman of the Board
of Directors.
Ronald Steenbergen 36 Managing Director of Operating
Companies and a member of the Board
of Directors.
</TABLE>
Jerry Gruenbaum has served as President and as a member of the Board of
Directors since 1997. He served as Chairman of the Board from 1997 to 1999. He
has worked for the tax departments for Peat Marwick Mitchell & Co (now KPMMG
Peat Marwick LLP) and Arthur Anderson & Co. (now Arthur Anderson LLP). He has
served as Compliance director for CIGNA Securities, a division of CIGNA
Insurance. He has lectured and taught at various Universities throughout the
United States in the areas of Industrial and financial Accounting, taxation,
business law, and investments. He has been admitted to practice law since 1979
and is a licensed attorney in various states. He is a member of the American
Institute of Certified Public Accountants. Mr. Gruenbaum graduated from Brooklyn
College, has a masters degree in accounting from Northeastern University, a law
degree from Western New England College School of Law, and a post doctorate
degree in tax law from the University of Miami School of Law.
Hans Lodders has served as Managing Director of Asia Business Division and
Chairman of the Board since 1999. He has been a resident of Hong Kong for
twenty-two years. He is the former Managing Director of AGFA Hong Kong-China,
where he has been employed from 1977 to 1999. During his tenure with AGFA, he
directed their Hong Kong-China operations from inception to achieve sales in
excess of HK$2 billion dollars. The markets that he targeted and has great
expertise in include Hong Kong, China, Taiwan, the Philippines, Vietnam and
Cambodia. The king of Belgium has knighted Mr. Lodders in 1995.
Ronald Steenbergen served as Managing Director of Operating Companies and a
member of the Board of Directors of Beacon Light since 1999. He has been a
resident of Hong Kong for eighteen years. He has over eighteen years experience
in sourcing, manufacturing and marketing of non-food consumer products in Asia,
Europe and the United States.
Key Management Employees of Klick Ltd, (49% owned by Beacon Light) in Hong
Kong:
Ronald Steenbergen who serves as the General Manager of Klick Ltd. also serves
as Managing Director of Operating Companies and a member of the Board of
Directors of Beacon Light.
<PAGE> 20
Karl Lai (31 years Old) serves as Purchasing Manager for Klick Ltd. He has over
ten years experience in merchandising and purchasing in Asia and greater China.
Key Management Employees of Wellux Hong Kong, our operating subsidiary in
Hong Kong:
Cris Hoare (34 years old) serves as General Manager of Wellux Hong Kong. A
resident of Hong Kong for over ten years, he has over 8 years experience in
industry, serving in management positions with general trading and electronic
software companies in Hong Kong. He is a United Kingdom citizen.
Key Management Employees of Wellux Netherlands the operating subsidiary of
Wellux Hong Kong:
Wim Hakkaart (55 years old) serves as General Manager of Wellux Netherlands. He
has over thirty years extensive experience in marketing within the European
Common Market countries and Eastern Europe. He is a resident and citizen of
Holland.
ITEM 6. EXECUTIVE COMPENSATION.
- -------- ------------------------
CASH COMPENSATION.
The following table shows, for the two-year period ended June 30, 1999, the
cash and other compensation we paid to our Chief Executive Office and to each of
our executive officers.
<TABLE>
SUMMARY COMPENSATION TABLE
--------------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ----------------------------- ------- ------- ----- ------------
<S> <C> <C> <C> <C>
Jerry Gruenbaum (1) 1998-99 -0- -0- $12,000
President 1997-98 -0- -0- $25,750
Hans Lodders (2) 1998-99 -0- -0- -0-
Managing Director
Asia Business Division
Ronald Steenbergen (3) 1998-99 -0- -0- -0-
Managing Director
Operating Companies
</TABLE>
Footnotes:
(1) For the two-year period ended June 30, 1999 we had no employment
agreement with Mr. Jerry Gruenbaum. As such, we paid him a total of $25,750 for
the period ended June 30, 1998 and a total of $12,000 for the period ended June
30, 1999. The payments, while classified as Executive Compensation here and in
the accompanying financial statements, were classified for tax purposes as an
independent contractor with no personal deductions taken by our Company. On
January 2, 2000 we have entered into an employment agreement with Mr. Gruenbaum
starting from January 1, 2000 to December 31, 2005 for an annual compensation of
$60,000 plus a minimum increase per year. In addition we gave Mr. Gruenbaum
500,000 Rule 144 stock as other compensation plus an option to purchase an
additional 250,000 shares at $0.15 per share that expires on December 31, 2004
pursuant to our Fiscal 2000 Stock Option Plan. A copy of his employment
agreement is attached as an exhibit.
<PAGE> 21
(2) On January 2, 2000 we have entered into an employment agreement with Mr.
Hans Lodders starting from January 1, 2000 to December 31, 2005 for an annual
compensation of $60,000 plus a minimum increase per year. In addition we gave
Mr. Lodders 500,000 Rule 144 stock as other compensation (said shares have not
been issued to date) plus an option to purchase an additional 250,000 shares at
$0.15 per share that expires on December 31, 2004 pursuant to our Fiscal 2000
Stock Option Plan. A copy of his employment agreement is attached as an
exhibit.
(3) On January 2, 2000 we have entered into an employment agreement with Mr.
Ronald Steenbergen starting from January 1, 2000 to December 31, 2005 for an
annual compensation of $50,000 plus a minimum increase per year. In addition we
gave Mr. Steenbergen 500,000 Rule 144 stock as other compensation (said shares
have not been issued to date) plus an option to purchase an additional 250,000
shares at $0.15 per share that expires on December 31, 2004 pursuant to our
Fiscal 2000 Stock Option Plan. A copy of his employment agreement is attached
as an exhibit.
OPTION GRANTS IN THE LAST FISCAL YEAR.
- --------------------------------------------
The following table sets forth information with respect to the grant of
options to purchase shares of common stock during the fiscal year ended June 30,
1999, to each person named in the Summary Compensation Table.
<TABLE>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE OR
UNDERLYING GRANTED TO BASE PRICE
OPTIONS/SARS EMPLOYEES IN ($/SHARES) EXPIRATION
NAME GRANTED (#) FISCAL YEAR DATE
- ---------------------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Jerry Gruenbaum 0 0 N/A N/A
Hans Lodders 0 0 N/A N/A
Ronald Steenbergen 0 0 N/A N/A
</TABLE>
- - Subsequent to the end of the fiscal year ended June 30, 1999, On January
18, 2000 we have issued 250,000 options to Mr. Gruenbaum, Mr. Lodders and Mr.
Steenbergen pursuant to our Fiscal 2000 Stock Option Plan. The options are
exercisable at $0.15 and expire December 31, 2004. The market price of the
shares on that date was $0.12.
1999 STOCK OPTION PLAN
In November 15, 1999, Our Board of Directors adopted the Fiscal 2000 Stock
Option Plan (the "Plan") as a means of increasing employees', board of advisors,
consultants' and non-employee directors' proprietary interest and to align more
closely their interest with the interests of our stockholders. The Plan should
also maintain our ability to attract and retain the services of experienced and
highly qualified employees and non-employee directors.
Under the Plan, we have reserved an aggregate of 3,000,000 shares of Common
Stock for issuance pursuant to options ("Plan Options"). Our Board of Directors
or a Committee of our Board of Directors (the "Committee") will administer the
Plan, including, without limitation, the selection of the persons who will be
granted Plan Options under the Plan, the type of Plan Options to be granted, the
number of shares subject to each Plan Option and the Plan Option price.
<PAGE> 22
Plan Options granted under the Plan may be options qualifying as incentive
stock options ("Incentive Options") under Section 422 of the Internal Revenue
Code of 1986, as amended, or options that do not so qualify (Non-Qualified
Options"). In addition, the Plan also allows for the inclusion of a reload
option provision ("Reload Option"), which permits an eligible person to pay the
exercise price of the Plan Option with shares of Common Stock owned by the
eligible person and receive a new Plan Option to purchase shares of Common Stock
equal in number to the tendered shares. Any Incentive Option granted under the
Plan must provide for an exercise price of not less than 100% of the fair market
value of the underlying shares on the date of such grant, but the exercise price
of any Incentive Option granted to an eligible employee owning more than 10% of
the Company's Common Stock must be at least 110% of such fair market value as
determined on the date of the grant. The term of each Plan Option and the
manner in which it may be exercised is determined by our Board of Directors or
the Committee, provided that no Plan Option may be exercisable more than 10
years after the date of its grant and, in the case of an Incentive Option
granted to an eligible employee owning more than 10% of our Common Stock, no
more than five years after the date of the grant. The exercise price of
Non-Qualified Options shall be determined by our Board of Directors of the
Committee.
The per share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in our
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Our officers, directors, key employees and consultants (including any
subsidiary) will be eligible to receive Non-Qualified Options under the Plan.
Only our employees (including any subsidiary) are eligible to receive Incentive
Options.
Recipients of Plan Options may not assign or transfer them, except by will
or by the laws of descent and distribution. During the lifetime of the
optionee, an option may be exercised only by such optionee. If an optionee's
employment is terminated for any reason, other than his death or disability or
termination for cause, or if an optionee is not an employee but is a member of
our Board of Directors and his service as a Director is terminated for any
reason, other than death or disability, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date or 30 days
following the date of termination. If the optionee dies during the term of his
employment, the Plan Option granted to him shall lapse to the extent unexercised
on the earlier of the expiration date of the Plan Option or the date one year
following the date of the optionee's death. If the optionee is disabled, the
Plan Option granted to him lapses to the extent unexercised on the earlier of
the expiration date of the option or one year following the date of the
disability.
Our Board of Directors or the Committee may amend, suspend or terminate the
Plan at any time, except that no amendment shall be made which (i) increases the
total number of shares subject to the Plan, or (ii) changes the definition of an
Eligible Person under the Plan.
As of February 4, 2000, 1,785,000 Plan Options had been granted pursuant to
the Plan. As of February 4, 2000, no option had been exercised.
<PAGE> 23
OPTION EXERCISES AND HOLDINGS.
The following table sets forth information with respect to the exercise of
options to purchase shares of common stock during the fiscal year ended June 30,
1999 to each person named in the Summary Compensation Table and the unexercised
options held as of the end 1999 fiscal year.
<TABLE>
AGGREGATE OPTION/EXERCISES IN
LAST FISCAL YEAR AND 1998 FISCAL YEAR END OPTION/VALUES
-------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTION
SHARES ACQUIRED ON VALUE AT 1998 FISCAL YEAR
EXERCISE REALIZED END (#) EXERCISABLE
NAME (#) ($) UNEXERCISABLE
- ------------------- ------------------ -------- --------------------
<S> <C> <C> <C>
Jerry Gruenbaum 0 0 0
Hans Lodders 0 0 0
Ronald Steenbergen 0 0 0
</TABLE>
- - Subsequent to the end of the fiscal year ended June 30, 1999, we have
issued a total of 1,785,000 options pursuant to our Fiscal 2000 Stock Option
Plan, 250,000 options to Jerry Gruenbaum, the Company's President; 250,000
options to Hans Lodders, the Company's Managing Director for Asian Business
Affairs; 250,000 options to Ronald Steenbergen, the Company's Managing Director
for Operating Companies; 100,000 options to Wim Hakkaart, the Manager of Wellux
BV; 200,000 options to Jan Opdam, the Financial Comptroller of the Wellux Group;
10,000 options to Sunil Vasudev, the company accountant; 10,000 option to Karl
Lai, the Marketing Manager for Klick; 5,000 options to Mary Yeung, the Company
secretary; 500,000 options to Jean Claude Comptaert, the Marketing Sales
Coordinator for Wellux BV; 20,000 options to G.V. Dongen, Manager of Accounts
Logistics; 50,000 options to Paul Damen, the Manager of Households, Wellux BV;
20,000 options to Edward Droog, the Sales Manager for Wellux BV; 50,000 options
to Johannes Zwakhoven, the Sales Manager-Household Wellux BV; and 70,000 options
to Cris Hoare, the General Manager for Wellux HK. The options are exercisable at
$0.15 and expire June 30, 2004. The intrinsic value of the options on February
4, 2000 is $357,000.00 based on our determination of fair market value of the
purchased shares on the option exercise date less the exercise price paid for
the shares.
<TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
------------------------------------------------------
NUMBER OF SHARES, PERFORMANCE OR
UNITS OR OTHER OTHER PERIOD UNTIL
RIGHTS MATURATION OR
NAME ($) PAYOUT
- ----------------------- ---------------------- ------------------
<S> <C> <C>
Jerry Gruenbaum 0 0
Hans Lodders 0 0
Ronald Steenbergen 0 0
</TABLE>
<PAGE> 24
- - Subsequent to the end of the fiscal year ended June 30, 1999, we have
authorized 500,000 restricted shares to Mr. Gruenbaum, Mr. Lodders and Mr.
Steenbergen. The shares to Mr. Lodders and Mr. Steenbergen have not been to
date. Only the shares to Mr. Gruenbaum have been issued. The intrinsic value of
the shares on January 2, 2000 the date they were issued is $25,000 to each
officer based on our determination of fair market value of $0.05 per share for a
restricted share that may not be traded for two years from the date of issue.
Mr. Gruenbaum was also sold an additional 1,500,000 restricted shares at the
same $0.05 per share for a total of $75,000 payable by a five-year
interest-bearing note to the Company.
EXECUTIVE EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Jerry Gruenbaum, our
President and Director for five years commencing on January 1, 2000 and
terminating on December 31, 2004. Under said employment agreement we have agreed
to pay Mr. Gruenbaum, $60,000.00 per year payable semi monthly, 500,000 Rule 144
stock, and a stock option exercisable for five years for 250,000 Common Shares
pursuant to our Fiscal 2000 Stock Option Plan at $0.15 per share plus reasonable
expenses. A copy of the employment agreement is attached as exhibit 10-3.
We have entered into an employment agreement with Hans Lodders, our
Managing Director for Asia Business Division and Chairman of the Board of
Directors for five years commencing on January 1, 2000 and terminating on
December 31, 2004. Under said employment agreement we have agreed to pay Mr.
Lodders, $60,000.00 per year payable semi monthly, 500,000 Rule 144 stock, and a
stock option exercisable for five years for 250,000 Common Shares pursuant to
our Fiscal 2000 Stock Option Plan at $0.15 per share plus reasonable expenses.
A copy of the employment agreement is attached as exhibit 10-3(1).
We have entered into an employment agreement with Ronald Steenbergen, our
Managing Director for Operating Companies and Director for five years commencing
on January 1, 2000 and terminating on December 31, 2004. Under said employment
agreement we have agreed to pay Mr. Steenbergen, $50,000.00 per year payable
semi monthly, 500,000 Rule 144 stock, and a stock option exercisable for five
years for 250,000 Common Shares pursuant to our Fiscal 2000 Stock Option Plan at
$0.15 per share plus reasonable expenses. A copy of the employment agreement is
attached as exhibit 10-3(2).
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We were incorporated in the State of Idaho on April 16, 1953 under the name
Beacon Light Mining Company for the purpose of exploring and developing
potential silver mines in the northern part of the State Idaho. Our initial
certificate of incorporation authorized 1,500,000 shares of common stock of $.25
par value per share. The Company became inactive from the mid 1980's until mid
1997. The Company originally went public in the 1950s on a Regulation A
offering. Subsequently it was traded on the Spokane Exchange. The Spokane
Exchange is now defunct. Our Company's listing on the Spokane Exchange has also
since lapsed.
In March 1997, Jerry Gruenbaum the President and Director of our Company
located our Company in Idaho along with other unrelated investors in the silver
mining and timber fields and proceeded to negotiate the acquisition of a
majority control in our Company from a Mr. Lloyd Sanders the President and the
then member of the board of directors of our Company with the goal of merging it
with other silver mine claims and timber operations located in Montana, and
listing the Company on the NASDAQ Electronic Bulletin Board. At the time, our
Company had approximately 4,015,000 shares of common stock outstanding.
<PAGE> 25
Negotiation to merge our Company with other silver claims failed due to the
stagnation of the silver mining industry at the time and the lack of interest by
Mr. Sanders who was an expert in silver mining operations. Subsequently, Mr.
Gruenbaum approached Mr. Sanders with another proposal to acquire the majority
control in our Company. To accomplish the acquisition Mr. Gruenbaum sought the
advise of Mr. Timothy H. Masley, whose father was a close personal friend for
over fifteen years and a business partner for many years. Mr. Masley a former
investment banker and stockbroker had extensive knowledge with the operations of
the securities market and sources for necessary funds in the market to make the
acquisition. He was to act as the Company's investment banking consultant. Mr.
Masley insisted on retaining the guidance of a securities attorney help in the
acquisition because of legal securities violations he was facing at the time.
It was understood that because of these securities violations, Mr. Masley could
never be an officer or director of our Company. He recommended that his
acquaintance, an attorney Vincent L. Verdiramo, Sr. of Jersey City, New Jersey,
an attorney highly experienced in securities compliance be retained to oversee
the legal securities compliance for the Company including obtaining the
necessary funding and act as the Company's corporate and securities attorney.
In April 1997, Attorney Vincent Verdiramo negotiated with Mr. Sanders and
acquired on behalf of Ansam, Inc. of Jersey City, New Jersey for $55,000.00,
5,500,000 Rule 144 stock of our Company and thereby a majority control of it and
changed direction of the Company from silver mining to a holding company for
manufacturing operations in China. Ansam, Inc. a New Jersey corporation, is
owned entirely by Attorney Vincent Verdiramo, the prior legal counsel for our
Company. The 5,500,000 Rule 144 Ansam shares have since been reversed, the
trading restrictions have been removed in 1998, and have been sold into the
market. Ansam, Inc. no longer has any interest in our Company and Attorney
Vincent Verdiramo is no longer associated with our Company.
In June 1997, a special meeting of the shareholders of our Company was held
at the office of Attorney Vincent Verdiramo, in Jersey City, New Jersey pursuant
to a proxy sent to all shareholders. It was resolved in that meeting that that
the Company reverse split its shares one for ten in accordance with said proxy
statement. It was further resolved that the Company increase its authorized
number of shares to 50,000,000 shares and the par value be decreased to $.001
per share. It was further resolved that Jerry Gruenbaum; Maureen Bell, Mr.
Masley's sister; and Maureen Hogan, a person who worked with Attorney Verdiramo,
be elected as the directors of the Company. Jerry Gruenbaum was appointed
President of our Company, a position he holds to this date, responsible for
negotiating and acquiring business operations from the Peoples Republic of China
to be merged into our Company. Ms. Hogan was appointed secretary/treasurer
responsible for opening and maintaining the Company's bank accounts. Ms. Bell
was appointed Vice President in charge of investor relations.
In September 1997, Attorney Verdiramo purchased 100,000 shares of the
Company, and Mr. Masley through various nominee companies purchased additional
at least 300,000 shares of the Company. Attorney Verdiramo authorized the
transfer agent to issue 1,000,000 Rule 144 shares to Boursa Intelligencia for
consulting services. No board meeting was ever conducted or approved upon to
issue the above shares. The Company was not notified by its investment-banking
consultant, its attorney or the transfer agent that said shares were issued.
Said shares had their trading restriction removed in late 1998 at the request of
Attorney Verdiramo, transferred to a brokerage firm in Canada, and later
transferred again to another brokerage firm in Canada to an account we believe
is indirectly controlled through a nominee by Mr. Masley. We are aware where
these shares are located and we are pursuing the remaining shares at this time.
<PAGE> 26
In February 1998 we changed our domicile from the State of Idaho to the
State of Nevada. In February 1998 we amended our Nevada Articles of
Incorporation to state that the total authorized number of Common shares are to
change to 45,000,000 shares with a par value of $.001 per share, and that we are
authorized to issue 5,000,000 Preferred shares with a par value of $0.001 with
an 8% coupon, convertible into common for a period of 5 years at $1.00. In
February 1998 we changed our name to Beacon Light Holding Corporation.
In May 1998 Attorney Verdiramo authorized our transfer agent to issue
1,000,000 free trading shares to XCEL Associates Inc. No board meeting was ever
conducted or approved upon to issue the above shares. We were never notified by
our investment-banking consultant, our attorney or our transfer agent that said
shares were issued. Said shares were mailed from the transfer agent to the
office of Attorney Verdiramo per his instruction. Said shares have not been
paid for and were directed to an account in Canada we believe are indirectly
under the control of our former investment-banker. We are aware where these
shares are located and we are pursuing the remaining shares at this time.
In January 1999, we replaced Maureen Hogan with Fukman Yip, a U.S. citizen
born in Hong Kong with direct knowledge of the Chinese markets. In May 1999, we
issued 250,000 Rule 144 shares to Fukman Yip, 100,000 Rule 144 shares to Maureen
Bell both of whom were directors of the Company, and 200,000 Rule 144 shares to
Richard J. Verdiramo, the younger son of Attorney Verdiramo for services
rendered to our Company.
In May 1999, we issued 4,000,000 Rule 144 shares to Crown Union Investment
Ltd. for one hundred percent interest in Wellux Industries Limited. In
accordance with the acquisition negotiation, Mr. Yip and Ms. Bell resigned from
our board of directors and were replaced by Hans Lodders our current Chairman of
the Board and Managing Director of our Asian Business Division and Ronald
Steenbergen a current member of the board and the Managing Director of our
Operating Companies. One of the shareholders of Crown Union Investments Ltd. is
a Ms. Noortje Vogeltje Lodders, who is Mr. Lodders' daughter. She controls
1,333,333 of these shares.
In May 1999, we issued 2,000,000 free trading shares to Morgan Jason, as
part of an investment-banking agreement to negotiate the acquisition of Niphix
Systems, Inc. for Beacon Light. For business reasons, we decided on a later
date not to pursue the completion of the Niphix Agreement. To date, we received
$100,000.00 for these shares from Morgan Jason. The $100,000.00 was used to
purchase shares on behalf of our Company in Niphix Systems, Inc. We believe
that Mr. Masley has an indirect ownership with Morgan Jason at the time. As of
July 1999, we have terminated our association with Mr. Masley, who as of
February 2000 has been sentenced and incarcerated for Securities violations
unrelated to his association with our Company. We are currently assessing with
our legal counsel on whether to seek any further legal recourse against Mr.
Masley.
In August 1999 we issued 7,500 shares of Rule 144 stock having a market
value at the time of $1,125.00 taking into account their restrictions, to
Timothy E. Morgan, Esq. In settlement of a personal suit against our president
as legal counsel for a franchisor in California. The basis of the suit is that
our president in his prior capacity as the attorney for a franchisor in
California failed to disclose in the prospectus he prepared on behalf of the
franchisor, a material judgment against the owner of the franchisor. We
believed it was in our best interest to settle this matter.
<PAGE> 27
In September 1999, we authorized but have not issued to date 2,450,000 Rule
144 shares for a forty nine percent interest in Klick Limited, thirty percent
from Ma Yuk King a Hong Kong resident, fifteen percent from Drilford Ltd. a
Hong Kong Corporation, and four percent from KB Group, a British Virgin Island
Corporation that owns the remaining fifty-one percent interest. We have an
option for 360 days to purchase the remaining fifty-one percent interest in
Klick from the KB Group. Drilford, Ltd. is owned 80% by Mr. Lodders' wife and
20% by Mr. Lodders who is also a director.
In January 2000 we issued a total of 300,000 shares of Rule 144 stock,
200,000 to Frank Kavanaugh and 100,000 to John Pitkin, Esq. in settlement of a
default judgment against our president as legal counsel for a franchisor in
California. At the time, our shares were trading at $.12 per share for
unrestricted shares. The basis of the suit is that our president in his prior
capacity as the attorney for a franchisor in California failed to disclose in
the prospectus he prepared on behalf of the franchisor, a material judgment
against the owner of the franchisor. We believed it was in our best interest to
settle this matter. Said shares were paid from the 300,000 shares authorized
but never issued to our president in June 1999 as compensation settlement for
him for all works performed for fiscal year ended June 30, 1997, 1998 and 1999.
In January 2000 we issued 2,000,000 Rule 144 shares to Jerry Gruenbaum our
President and director. At the time, our shares were trading at $.12 per share
for unrestricted shares. 500,000 shares were treated as compensation in
accordance with the employment agreement of the same date and 1,500,000 shares
were sold to him at $.05 per share on a $75,000 note to the Company payable over
five years. Our shares were selling at the time for $0.12 for free trading
shares. The restrictions to trade on said shares can be removed in January
2002.
In January 2000 we have terminated our association with Attorney Vincent L.
Verdiramo, Sr. and are assessing with our legal counsel on whether to seek any
further legal recourse against him.
ITEM 8. DESCRIPTION OF SECURITIES
Under our amended certificate of incorporation, we are authorized to issue
up to 45,000,000 shares of common stock, par value $.001 per share, of which
19,413,922 shares were outstanding as of March 7, 2000. We are also authorized
to issue up to 5,000,000 shares of preferred convertible stock, par value $.001
per share, of which 766,667 shares were outstanding as of March 7, 2000.
COMMON STOCK
Each shareholder is entitled to one vote for each share of common stock
owned of record. The holders of shares of common stock do not posses cumulative
voting rights, which means that the holders of more than 50% of the outstanding
shares voting for the election of directors can elect all of the directors, and
in such event the holders of the remaining shares will be unable to elect any of
our directors. Holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available at such times and in such
amounts as our Board of Directors may determine. Upon our liquidation,
dissolution, or winding, the assets legally available for distribution to our
shareholders will be distributable ratably among the holders of the shares
outstanding at the time. Holders of our shares of common stock have no
preemptive, conversion, or subscription rights, and our shares of common stock
are not subject to redemption. All our shares of common stock are fully paid
and non-assessable.
<PAGE> 28
Of the outstanding shares of common stock of our Company as of March 7,
2000, approximately 11,686,422 shares are free trading shares, and approximately
8,227,500 shares are restricted securities as that term is defined in Rule 144
adopted under the Act ("Restricted Securities"). Rule 144 governs resale of
Restricted Securities for the account of any person, other than the issuer, and
restricted and unrestricted securities for the account of an "affiliate" of the
issuer. Restricted securities generally include any securities acquired
directly or indirectly from an issuer or its affiliates, which were not issued
or sold in connection with a public offering registered under the Securities
Act. An affiliate of the issuer is any person who directly or indirectly
controls, is controlled by, or is under common control with, the issuer.
Affiliates of the Company may include its directors, executive officers, and
persons directly or indirectly owning 10% or more of the outstanding common
stock. Under Rule 144, unregistered resale of restricted common stock cannot
be made until it has been held for one year from the later of its acquisition
from the Company or an affiliate of the Company. Thereafter, shares of common
stock may be resold without registration subject to Rule 144's volume
limitation, aggregation, broker transaction, notice filing requirements, and
requirements concerning publicly available information about the Company
("Applicable Requirements"). Resale by the Company's affiliates of restricted
and unrestricted common stock are subject to the Applicable Requirements. The
volume limitations provide that a person, or persons who must aggregate their
sales, cannot, within any three-month period, sell more than the greater of (i)
on percent of the then outstanding shares, or (ii) the average weekly reported
trading volume during the four calendar weeks preceding each such sale. A
person who is not deemed an "affiliate" of the Company and who has beneficially
owned shares for at least two years would be entitled to sell such shares under
Rule 144 without regard to the Applicable Requirements.
PREFERRED STOCK.
Under the certificate of incorporation, as amended, we are authorized to
issue 5,000,000 shares, par value $0.001 per share, of preferred stock with such
designation, rights and preferences as our Board of Directors may from time to
time determine. Accordingly our Board of Directors is empowered, without
stockholders approval, to issue preferred stock with dividends, liquidation,
conversion, voting or other rights, which could adversely affect the voting
power of other rights of the holders of our stock. We could issue preferred
stock as a method of discouraging, delaying or preventing a change of control of
our company. On November 15, 1999, our board of directors has created one
series of preferred stock, Series B Preferred Stock. On November 18, 1999, we
sold 766,667 shares of preferred shares for $0.15 per share, for a total of
$115,000 in reliance upon the exemption registration afforded by Rule 506 of
Regulation D as promulgated by the United States Securities and Exchange
Commission under the Securities Act of 1933, as amended.
In accordance with the Certificate of Designations, Preferences and Rights
of Series B Convertible Preferred Stock as filed with the State of Nevada, (a
copy of the full text is attached as EX-4.1(i)) said shares have the following
powers, designations, preferences and other special rights:
1. Dividends. The Preferred Shares bear dividends at a rate of 8.5% of their
stated value per annum, which are cumulative and accrue daily from the date they
are issued. Dividends are payable in cash on November 17, 2001 or at any other
date on which Buyer has a redemption right, on all preferred shares that are
redeemed and not converted to common shares. Any accrued and unpaid dividends
that are not paid within five (5) business days on redeemed shares when they are
due bear interest at the rate of 1.5% per month from the due date until it is
paid.
<PAGE> 29
2. Conversion of Preferred Shares. The Preferred Shares shall be
convertible into shares of the Company's common stock, par value $0.001 per
share at the conversion ration of 1.0.
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that sale of common
stock, or conversion of preferred stock to common stock or the availability of
such shares will have on the market price prevailing from time to time.
Nevertheless, the possibility exist, that substantial amounts of common stock
may be sold in the public market and therefore would likely have a material
adverse effect on the prevailing market price for our common stock and could
impair our Company's ability to raise capital through the sale of our equity
securities.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
Our shares of common stock are traded on the pink sheets. From October 22,
1997 through March 5, 1998 when we were called Beacon Light Mining Company and
our shares of common stock were traded over-the-counter and quoted on the OTC
Electronic Bulletin Board under the symbol "BLMG". Our company name was changed
to its current name Beacon Light Holding Corporation on February 17, 1998 and
from March 6, 1998 to October 12, 1999 our shares of common stock were traded
over-the-counter and quoted on the OTC Electronic Bulletin Board under the
symbol "BLHG". The reported high and low bid prices for the common stock are
shown below for the period from the fourth quarter of 1997 through March 6,
2000. The prices are from the NASDAQ Quarterly Quote Summary Reports. The
quotations reflect inter-dealer prices and do not include retail mark-ups,
mark-downs or commissions. The prices do not necessarily reflect actual
transactions.
<TABLE>
HIGH BID LOW BID
--------- --------
<S> <C> <C>
1997
Fourth Quarter $1.75 $0.50
1998
First Quarter $1.25 $0.06
Second Quarter $1.63 $0.13
Third Quarter $0.50 $0.07
Fourth Quarter $0.15 $0.08
1999
First Quarter $1.61 $0.08
Second Quarter $1.25 $0.44
Third Quarter $0.70 $0.16
Fourth Quarter $0.25 $0.15
2000
First Quarter $0.42 $0.11
(through March 6, 2000)
</TABLE>
The closing price of our common stock on March 6, 2000, was $0.36.
As of March 6, 2000 there were approximately 671 holders of record of the
Company's common stock.
Our transfer agent is Jersey Transfer and Trust Company, Inc., 201
Bloomfield Avenue, Verona, New Jersey 07044, (973) 239-2712.
<PAGE> 30
DIVIDEND POLICY
We have never paid cash dividends on our common stock and we presently
intend to retain future earnings, if any, to finance the expansion of our
business. We do not anticipate that cash dividends will be paid in the
foreseeable future. Future dividend policy will depend on our earnings, capital
requirements, expansion plans, financial condition and other relevant factors.
ITEM 2. LEGAL PROCEEDINGS.
In July 1999 the U.S. Attorney's Office for the Eastern District of New
York subpoenaed the records of our Company. The agency has further subpoenaed
the financial records of our auditors and our records from our transfer agent.
Both Jerry Gruenbaum the Company's President and Director and Hans Lodders the
Company's Chairman of the Board have been interviewed by that agency. On
March 10, 2000 the agency has notified us officially that we are being
Investigated and that our President is also the subject of the investigation for
His role in his association with our Company's former attorney Vincent L.
Verdiramo and our former investment-banking consultant Timothy Masley who now
is incarcerated for securities violations for matters unrelated to Beacon Light.
In July 1999 we have terminated our association with Mr. Masley and are
assessing with our legal counsel on whether to seek any further legal recourse
against him. In January 2000 we have terminated our association with Attorney
Vincent L. Verdiramo, Sr. and are assessing with our legal counsel on whether to
seek any further legal recourse against him.
Our management is not aware of any legal proceeding contemplated by any
governmental authority involving our Company, our subsidiaries or our Company's
property. No director, officer or affiliate of the Company, or any associate of
a director, officer or affiliate of our Company, or any associate of a director,
officer or affiliate of our Company: (i) is a party adverse to our Company or
our subsidiaries in any legal proceedings; or (ii) has an adverse interest to
the Company or its subsidiaries in any legal proceedings. Except as described
herein, our Company and our subsidiaries are not parties to any legal
proceedings and there are no other material legal proceedings pending with
respect to the property of our Company and our subsidiaries.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The firm of Hoffski & Pisano CPAs conducted our audit for years ended June
30, 1998 and June 30, 1999. Our relationship with that firm is ongoing.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the following transactions were affected us in
reliance upon exemptions from registration under the Securities Act of 1933 as
amended (the "Act") as provided in Section 4(2) thereof except as otherwise
indicated below. Each certificate issued for unregistered securities contained
a legend stating that the securities have not been registered under the Act and
setting forth the restrictions on the transferability and the sale of the
securities. No underwriter participated in, nor did we pay any commission or
fee to any underwriter in connection with any of these transactions. None of
the transactions involved a public offering.
In April 8, 1997 we sold for $55,000, 5,500,000 Rule 144 stock of our
Company under Rule 504 of Regulation D to the Securities Act of 1933 to Ansam,
Inc.
<PAGE> 31
On August 11, 1997 we undertook a 10:1 reverse stock split of our Common
Stock. All figures set forth below give effect to the reverse split.
In September 30, 1997 we sold for an aggregate of $12,000 an aggregate of
800,000 shares of our common stock to 8 investors under Rule 504 of the
Regulation D to the Securities Act of 1933. We further issued 1,000,000 Rule
144 shares to Boursa Intelligencia for consulting services. No board meeting
was ever conducted or approved upon to issue the above shares. The Company was
not notified by its investment-banking consultant Timothy H. Masley, it attorney
Vincent L. Verdiramo, Sr., Esq., or its transfer agent Jersey Transfer and Trust
Co. that said shares were issued.
In February 18, 1998 we sold for an aggregate of $60,000 an aggregate of
600,000 shares of our common stock to various investors under Rule 504 of the
Regulation D to the Securities Act of 1933.
In April 30, 1998 we sold for an aggregate of $40,000 an aggregate of
400,000 shares of our common stock to various investors under Rule 504 of the
Regulation D to the Securities Act of 1933.
In May 18, 1998 we sold for an aggregate of $250,000 an aggregate of
1,000,000 shares of our common stock to various investors under Rule 504 of the
Regulation D to the Securities Act of 1933.
In May 22, 1998 we sold for an aggregate of $25,000 an aggregate of 100,000
shares of our common stock to Fermasa USA under Rule 504 of the Regulation D to
the Securities Act of 1933.
In May 27, 1998 we sold for an aggregate of $52,500 an aggregate of 210,000
shares of our common stock to various investors under Rule 504 of the Regulation
D to the Securities Act of 1933.
In May 27, 1998 we sold for an aggregate of $250,000 an aggregate of
1,000,000 shares of our common stock to XCEL Associates under Rule 504 of the
Regulation D to the Securities Act of 1933. We were never paid the $250,000 and
no board meeting was ever conducted or approved upon to issue the above shares.
The Company was not notified by its investment-banking consultant, it attorney,
or its transfer agent that said shares were issued.
In July 16, 1998 we issued an aggregate of 800,000 Rule 144 shares plus an
additional 1,000,000 options at $0.13 per share to Lloyd Wade Securities and
various officers and associates of that firm for investment banking services.
In February 17, 1999 we sold for an aggregate of $70,650 an aggregate of
785,000 shares of our common stock to various investors under Rule 504 of the
Regulation D to the Securities Act of 1933.
In May 10, 1999 we issued 250,000 Rule 144 shares to Fukman Yip for
directors services, 100,000 Rule 144 shares to Maureen Bell for directors
services and 200,000 Rule 144 shares to Richard J. Verdiramo for services
rendered to the Company.
In May 18, 1999 we sold for an aggregate of 9,400,000 shares of our common
stock to various investors under Rule 504 of the Regulation D to the Securities
Act of 1933. To date we have cancelled 6,300,000 of said shares. 2,000,000
shares have been sold to Morgan Jason, as part of an investment-banking
agreement to negotiate the acquisition of Niphix Systems, Inc. for Beacon Light.
To date the Company received $100,000.00 for these shares from Morgan Jason.
1,000,000 shares were sold to Victor Roosen for $84,000.00 paid to the Company
in September 1999. The company is aware where the Morgan Jason shares are
located and are pursuing the remaining shares at this time.
<PAGE> 32
In May 18, 1999 we issued 4,000,000 Rule 144 shares to Crown Union
Investment Ltd. for the one hundred percent interest in Wellux Industries
Limited.
In June 11, 1999 we issued 500,000 Rule 144 shares to VJMA Roosen for the
one hundred percent interest in VJMA Roosen.
In August 3, 1999 we issued 7,500 Rule 144 shares to Timothy E. Morgan,
Esq. In settlement of a personal suit against our company's president as legal
counsel for a franchisor in California. The basis of the suit is that our
president in his prior capacity as the attorney for a franchisor in California
failed to disclose in the prospectus he prepared on behalf of the franchisor, a
material judgment against the owner of the franchisor. We believed it was in
our best interest to settle this matter
In October 9, 1999 we sold for an aggregate of $200,000 an aggregate of
800,000 shares of our common stock to various investors in Holland under Rule
504 of the Regulation D to the Securities Act of 1933.
In November 18, 1999 we sold for $115,000, 766,667 shares of our Series B
convertible preferred stock to Vijuk Equipment, Inc. under Rule 506 of the
Regulation D to the Securities Act of 1933.
In January 2, 2000 we issued a total of 300,000 shares of Rule 144 stock,
200,000 to Frank Kavanaugh and 100,000 to John Pitkin, Esq. in settlement of a
default judgment against our company's president as legal counsel for a
franchisor in California. The basis of the suit is that our president in his
prior capacity as the attorney for a franchisor in California failed to disclose
in the prospectus he prepared on behalf of the franchisor, a material judgment
against the owner of the franchisor. We believed it was in our best interest to
settle this matter. Said shares were paid from the 300,000 shares authorized
but never issued to our president in June 1999 as compensation settlement for
him for all works performed for fiscal year ended June 30, 1997, 1998 and 1999.
In January 2, 2000 we issued 2,000,000 Rule 144 shares to Jerry Gruenbaum
our President and director. 500,000 shares were treated as compensation in
accordance with the employment agreement of the same date and 1,500,000 shares
were sold to him at $.05 per share on a $75,000 note to the Company payable over
five years. Our shares were selling at the time for $0.12 for free trading
shares. The restrictions to trade on said shares can be removed in January
2002.
In February 7, 2000 we sold for $110,000, 1,000,000 Rule 144 shares of our
common stock to a European accredited investor under Rule 504 of the Regulation
D to the Securities Act of 1933. To date the investor has paid us $55,000 for
500,000 Rule 144 shares.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Chapter 78 of the Nevada Revised Statutes permits the indemnification of
directors, employees, officers and agents of Nevada corporations as follows:
Section 78.7502 Discretionary and mandatory indemnification of officers
directors, employees and agents:
<PAGE> 33
General provisions.
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or opposed to the best interests of
the corporation, and that, with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudicated by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the courts
deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsection 1 and 2, or in defense of
any claim, issue or matter therein, the corporation shall indemnify him against
expenses, including attorney's fees, actually and reasonably incurred by him in
connection with the defense.
Section 78.751 Authorization required for discretionary indemnification;
advancement of expenses; limitation on indemnification and advancement of
expenses.
- --------------------------------------------------------------------------------
1. Any discretionary indemnification
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not party to the action,
suit or proceeding;
<PAGE> 34
(c) If a majority vote of a quorum consisting of directors who
were not parties to the action, suit or proceeding so ordered,
by independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
2. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors of
officers may be entitled under any contract or otherwise by law.
3. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, for
either an action in his official capacity or an action in
another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to
NRS 78.7502 or for the advancement of expenses made pursuant to
subsection 2, may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
Section 78.752 Insurance and other financial arrangements against liability of
directors, officers, employees and agents.
- -----------------------------------------------------------------------------
1. A corporation may purchase and maintain insurance or make other financial
arrangements on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any liability asserted
against him and liability and expenses incurred by him in his capacity as a
director, officer, employee or agent, or arising out of his status as such,
whether or not the corporation has the authority to indemnify him against such
liability and expenses.
2. The other financial arrangements made by the corporation pursuant to
subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the
corporation.
(d) The establishment of a letter of credit, guaranty or surety.
<PAGE> 35
No financial arrangement made pursuant to this subsection may provide protection
for a person adjudicated by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable for intentional misconduct, fraud or a
knowing violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a person
pursuant to this section may be provided by the corporation or any other person
approved by the board of directors, even if all or part of the other person's
stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of the
terms and conditions of any insurance or other financial
arrangement made pursuant to this section and the choice of the
person to provide the insurance or other financial arrangement is
inclusive; and
(b) The insurance or other financial arrangement:
(1) is not void or voidable; and
(2) Does not subject any director approving it to personal
liability for his action, even if a director approving
the insurance or other financial arrangement is a
beneficiary of the insurance or other financial
arrangement.
5. A corporation or its subsidiary which provides self-insurance for itself
or for another affiliated corporation pursuant to this section is not subject to
the provisions of Title 57 of NRS.
Our Certificate of Incorporation, as amended, provides as follows:
NINTH. No director or officer of the corporation shall be personally liable to
the corporation or any of its stockholders for damages for breach of fiduciary
duty as a director or officer or for any act or omission of any such director or
officer; however, the foregoing provision shall not eliminate or limit the
liability of a director or officer for (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (b) the payment
of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article by the stockholders of the corporation
shall be prospective only and shall not adversely affect any limitation on the
personal liability of a director or officer of the corporation for acts or
omissions prior to such repeal or modification.
Our Bylaws as amended, provide as follows:
Section 3.17 Directors Liability
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under Nevada Law. The
corporation is authorized to indemnify the directors of the corporation to the
fullest extent permissible under Nevada Law.
Section 4.12 Officers Liability
The liability of the directors of the corporation for monetary damages shall be
eliminated to the fullest extent permissible under Nevada Law. The corporation
is authorized to indemnify the directors of the corporation to the fullest
extent permissible under Nevada Law.
<PAGE> 36
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that, in the opinion of the Commissioner, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
PART F/S
Financial Statements
Beacon Light Holding Corporation
June 30, 1999
PAGE
- --------------------------------------------------------------------- ----
TABLE OF CONTENTS 1
ACCOUNTANTS' AUDIT REPORT 2
FINANCIAL STATEMENTS
Balance Sheets 3-4
Statement of Operations 5
Statements of Stockholders' Equity 6
Statement of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-16
<PAGE> 37
Independent Auditor's Report
----------------------------
Board of Directors
Beacon Light Holding Corporation and Subsidiaries
Hartford, Connecticut
We have audited the consolidated balance sheets of Beacon Light Holding
Corporation and Subsidiaries (a Nevada Corporation, successor to Beacon Light
Mining Company (Note1)) as of June 30, 1999 and 1998, and the related
consolidated statements of operations and stockholders' equity, and cash flows
for the years then ended June 30, 1999, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Wellux Industries,
Limited and Subsidiaries, a wholly owned subsidiary, which statements reflect
total assets and revenues constituting 71% (seventy-one percent) and 100% (one
hundred percent), respectively, for the fiscal year ended June 30, 1998, and 92%
(ninety-two percent) and 100% (one hundred percent), respectively, for fiscal
year ended June 30, 1999, of the related consolidated totals. Those statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Wellux Industries,
Limited and Subsidiaries, is based solely on the report of other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Beacon Light Holding Corporation
and Subsidiaries as of June 30, 1999 and 1998, and the results of its operations
and its cash flow for the years then ended June 30, 1999, 1998, and 1997 in
conformity with generally accepted accounting principles.
/s/Hoffski & Pisano
---------------------------
Hoffski & Pisano, CPAs
Irvine, California
March 10, 2000
<PAGE> 38
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
AS OF JUNE 30, 1999 AND 1998
(in United States dollars)
<TABLE>
JUNE 30, JUNE 30,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 36,643 $ 273,521
Accounts Receivable 489,227 17,831
Inventories 582,058 133,016
Prepaid Expenses 20,331 -
Investments 100,000 -
----------- -----------
TOTAL CURRENT ASSETS $1,228,259 $ 424,368
FIXED ASSETS
Property, Equipment & Leasehold Improvements
Less Accumulated Depreciation & Amortization $ 330,051 $ 256,918
----------- -----------
TOTAL FIXED ASSETS $ 330,051 $ 256,918
OTHER ASSETS
Deposits $ 13,402 $ 481
----------- -----------
TOTAL OTHER ASSETS $ 13,402 $ 481
----------- -----------
TOTAL ASSETS $1,571,712 $ 681,767
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 601,257 59,912
Accrued Liabilities 65,058 110
Amount Due Foreign Directors 613,774 391,965
Income Taxes Payable 500 250
----------- -----------
TOTAL CURRENT LIABILITIES $1,281,420 $ 452,237
Stockholders' Equity
Common Stock, $.001 Par Value, $ 15,996 $ 6,091
45,000,000 Shares Authorized
16,096,422 Shares Issued and Outstanding
(6,061,422 Shares in 1998)
Preferred Stock, $0.001 Par Value
5,000,000 Shares Authorized
No Shares Issued and Outstanding - -
Additional Paid-in Capital 611,182 401,067
Accumulated Deficit (336,655) (177,598)
----------- -----------
Total Stockholders' Equity $ 290,623 $ 229,530
----------- -----------
Total Liabilities and Stockholders' Equity $1,571,712 $ 681,767
=========== ===========
</TABLE>
See accompanying notes and independent auditors' report
<PAGE> 39
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
<TABLE>
June 30, June 30, June 30,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Gross Sales $ 4,109,017 $ 274,468 $ -
Cost of Goods Sold 2,391,724 200,853 -
------------- ------------- -------------
Gross Profit $ 1,717,293 $ 73,615 $ -
General & Administrative Expenses 1,746,100 190,963 4,995
------------- ------------- -------------
Income/(Loss) from Operations $ (28,807) $ (117,348) $ (4,995)
Other Income/(Expenses) (130,000) (60,000) -
------------- ------------- -------------
Net Income Before Taxes $ (158,807) $ (177,348) $ (4,995)
Provision for Income Taxes 250 250 250
------------- ------------- -------------
Net Income/(Loss) $ (159,057) $ (177,598) $ (5,245)
============= ============= =============
Net Income/(Loss) per
common Share - Basic $ (.02) $ (.07) $ (.01)
============= ============= =============
Weighted Average Shares
Outstanding - Basic 7,302,467 2,647,494 549,165
============= ============= =============
Net Income/(Loss) per
common Share - Diluted $ (.02) $ (.06) $ (.01)
============= ============= =============
Weighted Average Shares
Outstanding - Diluted 8,302,467 2,861,193 549,165
============= ============= =============
</TABLE>
See accompanying notes and independent auditors' report
<PAGE> 40
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
(begin 8pt type)
<TABLE>
Common Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1996 4,015,936 $ 401,393 $ - $ - $ (412,290) $ (10,897)
Stock Issued on
04/08/97 5,500,000 550,000 (495,000) - - 55,000
Change in Par Value
From $.01 per Share
to $.001 per Share
- 06/16/97 (941,980) 495,000 446,980 - - -
Reverse Stock Split
on One for Ten
Basis - 06/16/97 (8,563,514) (8,462) 8,462 - -
Net Income/(Loss) (5,245) (5,245)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1997 951,422 $ 951 $ - $ 455,442 $ (417,535) $ 38,858
Stock Issued on
09/30/97 for Cash 800,000 8,000 - 4,000 - 12,000
Stock Issued on
09/30/97 for
Services 1,000,000 10,000 (10,000) - - -
Reorganization - Idaho
Shares Retired and
Company Dissolved
02/16/98 (2,751,422) (18,951) 10,000 (459,422) 417,535 (50,858)
Reorganization -
Nevada Formed
Shares issued
On 2/16/98 2,751,422 2,751 - 48,107 - 50,858
Stock Issued on
02/18/98 for Cash/Notes 600,000 600 - 59,400 - 60,000
Less Notes Received - - - (35,064) - (35,064)
Stock Issued on
04/30/98 for Cash/Notes 400,000 400 - 39,600 - 40,000
Less Notes Received - - - (17,500) - (17,500)
Stock Issued on
05/18/98 for Cash/Notes 1,000,000 1,000 - 249,000 - 250,000
Less Notes Received - - - (16,166) - (16,166)
Stock Issued on
05/22/98 for Cash 100,000 100 - 24,900 - 25,000
Stock Issued on
05/27/98 for Cash/Notes 1,210,000 1,210 - 301,290 - 302,500
Less Notes Received - - - (252,500) - (252,500)
Net Income/(Loss) - - - - (177,598) (177,598)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1998 6,061,422 $ 6,061 $ - $ 401,067 $ (177,598) $ (229,530)
----------- ---------- ------------ ----------- ----------- -----------
</TABLE>
(end 8pt type)
See accompanying notes and independent auditors' report
<PAGE> 41
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1999, 1998 AND 1997 (Continued)
(in United States dollars)
(begin 8pt type)
<TABLE>
Common Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, at
June 30, 1998 6,061,422 $ 6,061 $ - $ 401,067 $ (177,598) $ (229,530)
Stock Issued on
07/16/98 for
Services 800,000 800 - (800) - -
Cash Recd. For Stock
Issued on 09/30/97 - - - 15,000 - 15,000
Stock Issued on
02/17/99 for Cash 785,000 785 - 69,865 - 70,650
Stock Issued on
05/10/99 for Services 550,000 550 - (550) - -
Stock Issued on
05/18/99 for Cash 2,000,000 2,000 - 128,000 - 130,000
Stock Issued on
05/18/99 for Notes
Receivable 1,100,000 1,100 - (1,000) - -
Stock Issued on
02/17/99 for Wellux 4,000,000 4,000 - 4,000 - -
Stock Issued on
02/17/99 for Roosen 500,000 500 - 500 - -
Stock Issued on
02/17/99
for Notes Receivable 300,000 300 - (300) - -
Net Income/(Loss) - - - - (159,057) (159,057)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1999 16,096,422 $ 16,096 $ - $ 611,182 $ (336,655) $ (290,623)
=========== =========== ============ ============ =========== ===========
</TABLE>
(end 8pt type)
See accompanying notes and independent auditors' report
<PAGE> 42
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
<TABLE>
June 30, June 30, June 30,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY/(USED IN)
OPERATING ACTIVITIES:
Net Income/(Loss) $ (159,057) $ (177,598) $ (5,245)
Non-Cash Items Included
in Net Income:
Depreciation 97,396 8,860 -
Change in Prepaids (20,331) - -
Change in Accounts Receivable (471,396) (17,831) -
Change in Inventory (449,042) (133,016) -
Change in Deposits (12,921) (481) -
Change in Accrued Liabilities 64,948 110 -
Change in Accounts Payable 541,845 58,478 (9,463)
Change in Income Tax Payable 250 250 -
Change in Amounts Due
Foreign Directors 221,809 391,965 -
------------- ------------- -------------
Net Cash Provided by/(Used in)
Operating Activities (186,499) 130,737 (14,708)
Cash Flows Used In Investing
Activities
Change in Investments (100,000) - -
Change in Lease Payments
Receivable
Purchase of Property, Equipment
& Leasehold Improvements (170,529) (265,778) -
------------- ------------- -------------
Net Cash Used For Investing
Activities (270,529) (265,778) -
Cash Flows from Financing Activities
Issuance of Common Stock 220,150 368,270 55,000
------------- ------------- -------------
Net Cash Provided by
Financing Activities 220,150 368,270 55,000
Net Change In Cash (236,878) 233,229 40,292
Cash At Beginning Of The Year 273,521 40,292 -
------------- ------------- -------------
Cash At End Of The Year $ 36,643 $ 273,521 $ 40,292
============= ============= =============
Supplemental Cash Flow Information:
Interest Paid $ - $ - $ -
============= ============= =============
Income Taxes Paid $ - $ - $ -
============= ============= =============
Non-cash Investing and Financing
Activities:
Common Stock Issued for
Notes Receivable $ 1,400 $ 321,230 $ -
</TABLE>
See accompanying notes and independent auditors' report
<PAGE> 43
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 1 - NATURE OF BUSINESS
- --------------------------------
The Company is engaged in the business of identifying and acquiring privately
held equity holdings in various entities worldwide.
The Company was created on December 3, 1997 as a Nevada Corporation and is an
ultimate successor to Beacon Light Mining Company, an Idaho Corporation (see
Note 3).
NOTE 2 - ACCOUNTING POLICIES
- --------------------------------
Principal of Consolidation
- ----------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned Hong Kong subsidiary, Wellux Industries Limited and
Subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation.
Recent Accounting Pronouncements
- ----------------------------------
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, was issued in June 1997. The pronouncement establishes
standards for the reporting and display of comprehensive income and its
components in financial statements. Comprehensive income is defined as the
total of net income and non-owner changes in equity. The Company believes this
statement does not have a material effect on its financial statements.
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures About
Fair Value of Financial Instruments, requires management to disclose the
estimated fair value of certain assets and liabilities defined by SFAS No. 107
as financial instruments. Financial instruments are generally defined by SFAS
No. 107 as cash, evidence of ownership interest in equity, or a contractual
obligation that both conveys to one entity a right to receive cash or other
financial instruments from another entity and imposes on the other entity the
obligation to deliver cash or other financial instruments to the first entity.
As of June 30, 1999 and 1998, management believes that the carrying amount of
cash accounts receivable, accounts payable, and accrued liabilities approximate
fair value because of the short maturity value of these financial instruments.
<PAGE> 44
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 2 - ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------------
Foreign Currency Transactions
- -------------------------------
Foreign currency transactions during the year are translated into United States
dollars at the exchange rates prevailing at the transaction dates. Monetary
assets are liabilities denominated in foreign currencies at year end are
translated into United States dollars at approximately the market rates of
exchange prevailing at the balance sheet date.
Gains and losses on exchange are shown in the Statement of Operations within the
General & Administrative Expenses section.
Cash Equivalents
- -----------------
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Income Taxes
- -------------
The Company accounts for income taxes under the provisions of Statements of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates.
Inventories
- -----------
Inventories are stated at the lower of cost or market. Inventory cost is
determined using the first-in, first-out (FIFO) method and includes raw
materials, packaging, labor, and overhead. Market is based on net realizable
value.
Office Furniture and Equipment
- ---------------------------------
Office furniture and equipment are stated at cost. Major renewals and
betterments are capitalized to the asset accounts while the cost of maintenance
and repairs is charged against income as incurred. At the time assets are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the respective accounts and the resulting gain or loss is credited
to or charged against income. Depreciation for financial reporting purposes is
calculated by the straight-line method over the estimated useful lives of the
assets. The Modified Accelerated Cost Recovery System (MACRS) method is used
for income tax purposes.
<PAGE> 45
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 2 - ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------------
Net Income/(Loss) Per Share
- ------------------------------
Net loss per share is computed based on the weighted average number of shares of
common stock outstanding.
Use of Estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
- -----------
On May 25, 1999, the Company purchased 8,000 shares in a closely held
corporation, which represents a less than 5% ownership. The investment is
stated at cost.
The Company also invested in a joint venture formed on February 18, 1998.
During the years ended June 30, 1999 and 1998, the Company contributed $130,000
and $60,000, respectively, to the joint venture. However, the joint venture
expended all of the funds provided by the Company and was subsequently
dissolved. Accordingly, a loss was recorded in the Statement of Operations in
the Other Income/(Expenses) section for the aforementioned years.
NOTE 3 - REORGANIZATION
- --------------------------
In February 1998, the company reorganized as a Nevada Corporation. Beacon Light
Mining Company, an Idaho Corporation ("Beacon Light - Idaho") merged into its
wholly owned subsidiary Beacon Light Mining Company, a Nevada Corporation
("Beacon Light - Nevada"), which became the surviving corporation. Prior to the
merger, Beacon Light - Idaho had 2,751,422 shares issued and outstanding and
Beacon Light - Nevada had 1 share issued and outstanding that was owned by
Beacon Light - Idaho. After the merger the 2, 751,422 common shares in Beacon
Light - Idaho were converted to 2,751,422 common shares in Beacon Light -
Nevada. The 1 share in Beacon Light - Nevada owned by Beacon Light - Idaho was
cancelled and returned to the status of un-issued. Thereafter, the Company
changed its name to Beacon Light Holding Corporation.
<PAGE> 46
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 3 - REORGANIZATION (CONTINUED)
- ---------------------------------------
In connection with the merger, all assets and liabilities of Beacon Light -
Idaho were assumed by Beacon Light - Nevada and all assets and liabilities of
the Idaho and Nevada Corporations were combined at their historical amounts in a
manner similar to that in pooling of interests accounting. Additionally, prior
accumulated deficit was netted with additional paid-in- capital in conjunction
with a charge in par value of the common stock to effectuate the transfer of
$50,858 in equity.
NOTE 4 - ACQUISITIONS
- ------------------------
On May 18, 1999, the Company acquired all the outstanding stock of Wellux
Industries Limited, a closely held Hong Kong Corporation, and its wholly owned
Netherlands Subsidiary, Wellux Holland B.V., by the issuance of shares of Beacon
Light Holding Corporation common stock to the shareholders of Wellux Industries
Limited in exchange for all the issued and outstanding shares of Wellux
Industries Limited. In connection with the Company's acquisition of Wellux
Industries Limited, all the issued and outstanding stock of Wellux Industries
Limited (10,000 shares) was exchanged for 4,000,000 shares of restricted common
stock under Rule 144 of the Securities Act of 1933. The transaction was
accounted for under the pooling method of accounting. Wellux Industries Limited
is engaged in the business of adult products.
On June 11, 1999, the Company's subsidiary, Wellux Industries Limited, acquired
all the outstanding stock of V.J.M.A. Roosen, a closely held Netherlands
Corporation, by the issuance of shares of Beacon Light Holding Corporation
common stock to the shareholder of V.J.M.A. Roosen in exchange for all of the
issued and outstanding stock of V.J.M.A. Roosen. In connection with Wellux
Industries, Limited's acquisition of V.J.M.A. Roosen, the business and all of
the business assets were exchanged for 500,000 shares of restricted common stock
under Rule 144 of the Securities Act of 1933. The transaction was accounted for
under the purchase method of accounting. V.J.M.A. Roosen is engaged in the
business of the importation and distribution of cookware and high end cutlery.
The separate results of operations of the Company and Wellux Industries, Limited
And Subsidiaries (Wellux) for the years ended June 30, 1999 and June 30, 1998
Are summarized as follows:
<TABLE>
Year ended June 30, 1999
------------------------------------
Company Wellux Combined
------------------------------- --------- ----------- ------------
<S> <C> <C> <C>
Revenues $ - $4,109,017 $4,109,017
Net Loss (326,421) 167,364 (159,057)
</TABLE>
<PAGE> 47
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 4 - ACQUISITIONS (CONTINUED)
- -------------------------------------
<TABLE>
Year ended June 30, 1998
------------------------------------
Company Wellux Combined
------------------------------- --------- ----------- ------------
<S> <C> <C> <C>
Revenues $ - $ 274,468 $ 274,468
Net Loss (206,727) 29,129 (177,598)
</TABLE>
There was no activity in the subsidiary companies prior to the fiscal
year ended June 30, 1998.
NOTE 5 - PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
- ---------------------------------------------------------------
Property, Equipment and Leasehold Improvements consist of the following:
<TABLE>
June 30,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Machinery & Plant Equipment $ 215,492 $ 215,896
Office Equipment 73,302 29,869
Leasehold Improvements 32,399 13,557
Motor Vehicles 115,114 6,456
------------ ------------
436,307 265,778
Less Accumulated Depreciation (106,256) (8,860)
------------ ------------
$ 330,051 $ 256,918
============ ============
</TABLE>
NOTE 6 - INCOME TAXES
- -------------------------
The Company has a net operating loss available carryover of up to 20 years for
Federal purposes. Pursuant to Internal Revenue Code Section 382 and the
regulations thereunder, the amounts of utilizable carryover may be limited as a
result of ownership changes or even eliminated if business continuity
requirements are not met. No carrybacks are available for State purposes while
carryforwards of the loss are permitted for up to five (5) years.
There were no temporary differences allowing no deferred tax liabilities to
arise.
<PAGE> 48
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 6 - INCOME TAXES (CONTINUED)
- --------------------------------------
Components of Income Tax Expenses are as follows:
<TABLE>
---------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT
Federal $ - $ -
State 250 250
------------ ------------
Net Provision/(Benefit) for Income Taxes $ 250 $ 250
============ ============
</TABLE>
NOTE 7 - STOCKHOLDERS' EQUITY
- ---------------------------------
As of June 30, 1999, the Company had 16,096,422 shares issued and outstanding.
Prior to July 1, 1997, the Company had 401,422 shares, as adjusted for reverse
splits, issued and outstanding. During the fiscal years ended June 30, 1999,
1998, and 1997, the Company issued an additional 15,596,000 shares of common
stock.
Shares were issued for cash, services, notes receivable, and corporate
acquisitions during the aforementioned years as follows:
<TABLE>
Shares Issued at June 30,
------------------------------------- Total
1999 1998 1997 by Type
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Cash 2,785,000 2,509,696 550,000 5,844,696
Services 1,350,000 1,000,000 - 2,350,000
Notes Receivable 1,400,000 1,600,304 - 3,000,304
Corporate Acquisition 4,500,000 - - 4,500,000
--------- --------- --------- ----------
Total by Year 10,035,000 5,110,000 550,000 15,695,000
Outstanding Shares
Prior to July 1, 1996 401,422
----------
Total Outstanding Shares 16,096,422
==========
</TABLE>
Each share of common stock is entitled to one vote. The stock is currently
traded through the National Quotation Bureau's "pink sheets" under the symbol
BLHG.
<PAGE> 49
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
- ----------------------------------------------
On July 13, 1998, the Company issued 1,000,000 stock purchase warrants to an
Investment banking firm in connection with the sale and promotion of the
Company's stock. Each warrant allows the holder to purchase one share of common
stock at $0.13 per share. The warrants expire on July 13, 2001.
NOTE 8 - COMMITMENTS
- -----------------------
Leases
- ------
The Company entered into an operating lease agreement for office space. The
lease term is one year and was renewed on March 1, 2000.
Future minimum lease payments under the operating lease has a remaining lease
term in excess of one year as of June 30, 1999 are as follows:
Fiscal Year Ending
June 30,
------------------
2000 $ 105,000
2001 85,000
2002 54,000
2003 54,000
2004 27,000
---------
Total $ 325,000
=========
NOTE 9 - RELATED PARTY TRANSACTIONS
During the years ended June 30, 1999 and 1998, various foreign directors of
Wellux Industries, Limited advanced the Company working capital in the amounts
of $613,774 and $391,965, respectively. These amounts due are non-interest
bearing and are due on demand.
<PAGE> 50
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
(SEE ACCOUNTANTS' AUDIT REPORT)
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
NOTE 10 - SUBSEQUENT EVENTS
- -------------------------------
In September 1999, the Company acquired a 49% (forty-nine percent) interest in
Klick Limited, a Hong Kong Company. The interest was acquired by the issuance
of 2,450,000 shares of Beacon Light Holding Corporation common stock in exchange
for 49% (forty-nine percent) of the outstanding common stock of Klick Limited.
Klick Limited is engaged in the business of household products.
On December 6, 1999, a subpoena to testify before the Grand Jury was issued by
the Federal Bureau of Investigation, Office of the United States Attorney, which
requested all accounting records and tax returns from fiscal and calendar year
1997 through, and including, 1999. All requested documentation has been sent in
compliance with the subpoena.
The Securities and Exchange Commission and the U.S. Postal Inspector are
also conducting a parallel investigation of the Company.
The ultimate purpose and outcome of the investigation is unknown as of the date
of this report.
<PAGE> 51
WELLUX INDUSTRIES LIMITED
DIRECTORS REPORT AND ACCOUNTS
FOR THE PERIOD FROM 24TH OCTOBER, 1996
(DATE OF INCORPORATION) TO 30TH JUNE, 1999
CONTENTS
Page
Report of the directors 1 and 2
Auditors' report 3
Consolidated profit and loss account 4
Consolidated balance sheets 5
Balance sheet 6
Consolidated cash flow statement 7
Notes to the accounts 8 to 14
<PAGE> 52
WELLUX INDUSTRIES LIMITED
REPORT OF THE DIRECTORS
The directors have pleasure in submitting their first annual report together
with the first audited accounts of the group for the period from 24th October,
1996 (date of incorporation) to 30th June, 1999. The Company commences its
business on 1st May, 1998.
PRINCIPAL ACTIVITY
The principal activity of the company and of the group during the period is
trading of adult products.
RESULTS AND APPROPRIATIONS
The results of the company for the period from 24th October, 1996 (date of
incorporation) to 30th June, 1999 and the state of affairs of the company at
that date are set out on pages 4 to 14. The directors do not recommend the
payment of a dividend in respect of the period ended 30th June, 1999.
FIXED ASSETS
Details of the movements in fixed assets of the company are shown in note 10 to
the accounts.
DONATIONS
During the period, the company has no charitable and other donations.
DIRECTORS
The directors during the period were:
Michael Roger Jarki (appointed on 9th December, 1996 and resigned on 30th
June, 1998)
Johan Barend Bource (appointed on 9th December, 1996 and resigned on 16th
March, 1999)
Ma Yuk King (appointed on 30th June, 1998)
Hans Lodders (appointed on 16th March, 1999)
In accordance with the company's Articles of Association, all existing Directors
shall retire from office and, being eligible, offer themselves for re-election.
INTEREST IN CONTRACTS
No contracts of significance to which the company and its subsidiary was a party
and in which a director had a material interest, whether directly or indirectly,
subsisted at the end of the period or at any time during the period.
At no time during the period was the company and its subsidiary a party to any
arrangements to enable the directors of the company to acquire benefits by means
of the acquisition of shares in or debentures of the company or any other body
corporate.
<PAGE> 53
WELLUX INDUSTRIES LIMITED
REPORT OF THE DIRECTORS (CONTINUED)
AUDITORS
During the period, Mssrs. Raymond Ching & Co. are appointed as the auditors of
the company who retire and, being eligible, offer themselves for reappointment.
On behalf of the Board
/s/Hans Lodders
- ----------------
Wellux Industries Limited
Director
HONG KONG, 25th February, 2000.
<PAGE> 54
RAYMOND CHING & CO. CERTIFIED PUBLIC ACCOUNTANTS
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
WELLUX INDUSTRIES LIMITED
-------------------------
(INCORPORATED IN HONG KONG WITH LIMITED LIABILITY)
We have audited the financial statements on pages 4 to 14 which have been
prepared in accordance with accounting principles generally accepted in Hong
Kong.
Respective responsibilities of directors and auditors
- ----------------------------------------------------------
The Companies Ordinance requires the directors to prepare financial statements
which give a true and fair view. In preparing financial statements which give a
true and fair view it is fundamental that appropriate accounting policies are
selected and applied consistently.
It is our responsibility to form an independent opinion on our audit, on those
statements and to report our opinion to you.
Basis of opinion
- ------------------
We conducted our audit in accordance with Statements of Auditing Standards
issued by the Hong Kong Society of Accountants. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant
estimates and judgments made by the directors in the preparation of the
financial statements, and of whether the accounting policies are appropriate to
the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance as to whether the financial
statements are free from material misstatement. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
financial statements. We believe that our audit provides a reasonable basis for
our opinion.
Opinion
As explained in note (13), the accountants cover a period in excess permitted by
section 122 of the Companies Ordinance.
In our opinion, the financial statements give a true and fair view, in all
material respects, of the state of affair of the company and the group as at
30th June, 1999 and of its profit and cash flows for the period then ended and,
except for the failure to comply with section 122 of the Companies Ordinance,
have been properly prepared in accordance with the Companies Ordinance.
/s/Raymond Ching & Co
- ------------------------
Raymond Ching & Co.
Certified Public Accountants
HONG KONG, 25th February, 2000.
Rm 1901, Easey Comm. Bldg., 261 Hennessy Road, Wanchai, Hong Kong
Tel:(852) 2389 3972 Fax:(852) 2877-8963
<PAGE> 55
WELLUX INDUSTRIES LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM 24TH OCTOBER, 1996
(DATE OF INCORPORATION) TO 30TH JUNE 1999
-----------------------------------------
<TABLE>
Notes HK$
<S> <C> <C>
TURNOVER 3 34,010,114
==========
PROFIT BEFORE TAXATION 4 1,680,719
TAXATION 5 156,003
----------
PROFIT AFTER TAXATION AND
BALANCE BROUGHT FORWARD 1,524,710
==========
</TABLE>
The notes on pages 8 to 14 form part of these accounts.
<PAGE> 56
WELLUX INDUSTRIES LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 30TH JUNE, 1999
---------------------
<TABLE>
Notes HK$
<S> <C> <C>
FIXED ASSETS 9 2,528,936
----------
CURRENT ASSETS 7 8,649,762
CURRENT LIABILITIES 8 9,643,982
----------
NET CURRENT ASSETS (994,220)
==========
TOTAL NET ASSETS 1,534,716
==========
Represented by:-
Share capital 12 10,000
Profit and loss account 1,524,716
----------
1,534,716
==========
</TABLE>
The notes on pages 8 to 14 form part of these accounts.
/s/Hans Lodders /s/Ma Yuk King
- ---------------- ----------------
Director Director
Date of approval by
Board of directors: 25th February, 2000.
<PAGE> 57
WELLUX INDUSTRIES LIMITED
BALANCE SHEET
AS AT 30TH JUNE, 1999
---------------------
<TABLE>
Notes HK$
<S> <C> <C>
FIXED ASSETS 10 1,578,163
----------
INVESTMENT IN SUBSIDIARIES 11 6,175,000
----------
CURRENT ASSETS 7 3,196,258
CURRENT LIABILITIES 8 9,212,125
----------
NET CURRENT LIABILITIES (6,015,867)
==========
TOTAL NET ASSETS 1,737,296
==========
Represented by:-
Share capital 12 10,000
Profit and loss account 1,727,296
----------
1,737,296
==========
</TABLE>
The notes on pages 8 to 14 form part of these accounts.
/s/Hans Lodders /s/Ma Yuk King
- ---------------- ----------------
Director Director
Date of approval by
Board of directors: 25th February, 2000.
<PAGE> 58
WELLUX INDUSTRIES LIMITED
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE PERIOD ENDED 30TH JUNE, 1999
------------------------------------
<TABLE>
Notes HK$
<S> <C> <C>
Net cash (outflow) from
Operating activities 16(a) (4,800,510)
Returns on investments and
Servicing of finance
Investing activities 16(c) (3,352,345)
----------
Net cash (outflow) before
Financing (8,152,855)
Taxation
Financing 16(d) 8,227,686
----------
Cash and cash equivalents at
30th June, 1999 74,831
==========
Analysis of the balance of cash
And cash equivalents
Cash and bank balances 81,276
Bank overdrafts (6,445)
----------
74,831
==========
</TABLE>
<PAGE> 59
WELLUX INDUSTRIES LIMITED
NOTES TO THE ACCOUNTS
---------------------
1. STATUS OF THE COMPANY
The company was incorporated in Hong Kong under the Companies Ordinance on 24th
October, 1996.
2. PRINCIPAL ACCOUNTING POLICIES
The accounts have been prepared in accordance with generally accepted accounting
principles in Hong Kong and with accounting standards issued by the Hong Kong
Society of Accountants.
(A) BASIS OF CONSOLIDATION
The group accounts comprise the consolidation of the accounts of the company and
all its subsidiaries. All significant transactions between and among the
companies and its subsidiaries are eliminated on consolidation.
Results of the subsidiaries are accounted for by the company on the basis of
dividends received and receivable. The company's interests in subsidiaries are
slated at cost less provision for permanent diminution in value.
(B) DEPRECIATION
Fixed Assets are stated at cost. Depreciation is provided to write of the cost
of fixed assets their estimated useful lives on a straight-line basis at the
annual rates:
Leasehold improvement 20%
Plant and machinery 20%
Motor vehicle 20%
Office equipment 20%
(C) INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Cost,
calculated on a fist in first out basis, includes cost of purchase, cost of
conversion, and other costs incurred in bringing the stock to their present
location and condition.
Net realizable value is the estimated setting price in the ordinary course of
business less than estimated cost of completion and the estimated cost necessary
to make the sale incurred.
(D) DEFERRED TAXATION
Deferred taxation is accounted for at the current tax rate in respect of timing
differences between profit as computed for taxation purposes and profit as
stated in the accounts to the extent that a liability or asset is expected to
payable or receivable in the foreseeable future.
<PAGE> 60
(E) FOREIGN CURRENCY TRANSACTION
Foreign currency transactions during the year are translated into Hong Kong
dollars at the exchange rates ruling at the transaction dates. Monetary assets
and liabilities denominated in foreign currencies at the year end are translated
into Hong Kong dollars at approximately the market rates of exchange ruling at
the balance sheet date.
(F) RECOGNITION OF INCOME
Income from the sale of product is recognized on the transfer of risks and
rewards of ownership which generally coincide with the time of shipment.
(G) SUBSIDIARY COMPANY
A subsidiary is a company in which Wellux Industries Limited, directly or
indirectly, controls more than half of the voting power or issued share capital
or controls the composition of the board of directors.
3. TURNOVER
Turnover represents sales proceeds from selling of adult products during the
period.
4. PROFIT BEFORE TAXATION
<TABLE>
Group Company
HK$ HK$
<S> <C> <C>
Profit before taxation has been
Arrived at after charging:
Auditors' remuneration 32,000 32,000
Depreciation 343,098 180,311
Preliminary expenses - 12,860
======= =======
</TABLE>
5. TAXATION
Hong Kong Profits Tax has been provided at 16% on the estimated assessable
profit of the company during the period.
No provision has been made for deferred taxation as, in the opinion of the
directors, the timing differences are so remote and the liability will not be
crystallized in the foreseeable future.
6. DIRECTORS' REMUNERATION
Directors' remuneration disclosed pursuant to section 161 of the Companies
Ordinance is as follows:
<TABLE>
Group Company
HK$ HK$
<S> <C> <C>
Fees 276,387 276,387
Other emoluments Nil Nil
======= =======
</TABLE>
<PAGE> 61
7. CURRENT ASSETS
<TABLE>
Group Company
HK$ HK$
<S> <C> <C>
Accounts receivable 3,796,208 1,972,214
Cash and bank balance 81,276 1,511
Inventories 4,516,538 983,433
Prepayment 151,746 151,746
Utility deposits 103,994 87,354
--------- ---------
8,649,762 3,196,258
========= =========
</TABLE>
8. CURRENT LIABILITIES
<TABLE>
Group Company
HK$ HK$
<S> <C> <C>
Accounts payable 1,231,848 846,436
Accruals 32,000 32,000
Amount due to directors 4,752,648 4,752,648
Amount due to holding company 3,465,038 3,465,038
Bank overdraft 6,445 -
Provision for taxation 156,003 156,003
--------- ---------
9,643,982 9,212,125
========= =========
</TABLE>
9. FIXED ASSETS-GROUP
<TABLE>
Leasehold Plant Motor Office
improvement machinery vehicle equipment Total
HK$ HK$ HK$ HK$ HK$
<S> <C> <C> <C> <C> <C>
Cost
Additions and
at 30/6/99 251,400 1,672,134 893,235 535,576 3,352,345
Accumulated
Depreciation
Charges for the
Period 53,780 390,165 264,638 114,826 823,409
------- --------- ------- ------- ---------
Net book value
At 30/6/99 197,620 1,281,969 628,597 420,750 2,528,936
======= ========= ======= ======= =========
</TABLE>
<PAGE> 62
10. FIXED ASSETS-COMPANY
<TABLE>
Leasehold Plant Motor Office
improvement machinery vehicle equipment Total
HK$ HK$ HK$ HK$ HK$
<S> <C> <C> <C> <C> <C>
Cost
Additions and
at 30/6/99 105,000 1,672,134 50,000 231,340 2,056,474
Accumulated
Depreciation
Charges for the
Period 24,500 390,165 11,667 53,979 480,311
------- --------- ------- ------- ---------
Net book value
At 30/6/99 80,500 1,281,969 38,333 177,361 1,578,163
======= ========= ======= ======= =========
</TABLE>
11. INVESTMENT IN SUBSIDIARY COMPANIES
<TABLE>
Place of Shareholding Principal Unquoted shares
Incorporation at 30/6/99 activities at cost
HK$
<S> <C> <C> <C> <C>\
Wellux Holland B.V. Holland 100% Adult Plastic 2,910,000
Products
V.J.M.A. Roosen Holland 100% Household 3,255,000
Products
---------
6,175,000
=========
</TABLE>
The investment in V.J.M.A. Roosen was by issuing of 500,000 common shares of
Beacon Light Holding Corporation to acquire the 100% shareholding from the
owners on 10th June, 1999. At the completion date of the acquisition, the stock
price of Beacon Light Holding Corporation was US$0.84 and the total
consideration would be US$420,000 (i.e. HK$3,255,000).
12. SHARE CAPITAL
HK$
Authorized, issued and fully paid:
10,000 ordinary shares of HK$1.00 each 10,000
======
On incorporation, 2 ordinary shares were issued at par value to the subscribers
of the company to provide initial working capital for the company.
<PAGE> 63
13. ACCOUNTING PERIOD
The accounts cover a period of 33 months since incorporation on 24th October,
1996 which is in excess of that permitted by section 122 of the Companies
Ordinance.
14. DIVIDEND INCOME FROM SUBSIDIARIES
HK$
Wellux Holland B.V. 705,895
V.J.M.A. Roosen 550,791
---------
1,256,686
=========
15. ULTIMATE HOLDING COMPANY
The ultimate holding company is Beacon Light Holding Corporation which was
incorporated in Nevada, USA.
16. NOTES TO CONSOLIDATED CASH FLOW STATEMENT
(A) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES.
HK$
Operating profit before
Taxation and interest 1,680,719
Depreciation 823,409
(Increase) in accounts receivable (3,796,208)
(Increase) in inventories (4,516,538)
(Increase) in prepayment (151,746)
(Increase) in utility deposits (103,994)
Increase in accounts payable 1,231,848
Increase in accruals 32,000
----------
Net cash outflow from
Operating activities (4,800,510)
==========
(B) ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR.
Amount Amount
due to due to
directors holding
HK$ HK$
Cash inflow from financing 4,752,648 3,465,038
--------- ---------
Balance at 30/6/1999 4,752,648 3,465,038
========= =========
<PAGE> 64
(C) INVESTING ACTIVITIES.
HK$
Purchase of fixed assets (3,352,345)
----------
Net cash (outflow) from
Investing activities (3,352,345)
==========
16. NOTES TO CONSOLIDATED CASH FLOW STATEMENT
(d) Financing.
HK$
Amount advanced from directors 4,752,648
Amount advanced from holding company 3,465,038
Amount from shares issued 10,000
----------
Net cash inflow from financing 8,227,686
==========
<PAGE> 65
WELLUX INDUSTRIES LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM 24TH OCTOBER, 1996
(DATE OF INCORPORATION) TO 30TH JUNE 1999
-----------------------------------------
(FOR MANAGEMENT PURPOSES ONLY)
<TABLE>
HK$
<S> <C>
Sales 20,168,853
----------
Less: Cost of sales
Purchases 13,350,980
Less: Closing stock 983,433
----------
12,367,547
==========
Gross profit 7,801,306
Dividend income 1,256,686
----------
9,057,992
Less: General and administrative expenses 7,174,693
----------
1,883,299
==========
</TABLE>
<PAGE> 66
<TABLE>
HK$
GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------
<S> <C>
Advertising 1,090,179
Auditors' remuneration 32,000
Bank charges and interest 31,036
Building management fee 14,196
Business registration fee 4,500
Cleaning 16,600
Commission to estate agents 9,145
Commission to salesmen 538,529
Computer expenses 6,183
Courier 19,958
Declaration 2,376
Depreciation 480,311
Director's emolument 276,387
Electricity and water 156,639
Entertainment 203,645
Freight 428,932
Insurance 7,125
Legal fee 38,113
Marketing expenses 500,508
Motor vehicle expenses 46,674
Oversea traveling 284,835
Packing materials 722,112
Postage 32,365
Preliminary expenses 12,860
Printing and stationary 18,140
Rent and rates 683,494
Repair and maintenance 9,017
Salaries and allowance 1,394,703
Secretarial fee 7,000
Sundry expenses 24,956
Telecommunication 11,516
Translation 2,411
Transportation 21,933
Traveling 15,984
---------
7,174,693
=========
</TABLE>
<PAGE> 67
Semi-Annual Financial Statements
Beacon Light Holding Corporation
As of December 31, 1999
-UNAUDITED-
Prepared by Management
PAGE
TABLE OF CONTENTS 1
FINANCIAL STATEMENTS
Balance Sheets 2-3
Statement of Operations 4
Statements of Stockholders' Equity 5-6
Statement of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-17
<PAGE> 68
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
<TABLE>
DEC. 31, DEC. 31,
1999 1998
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 39,921 $ 55,896
Accounts Receivable 765,625 358,198
Inventories 656,344 409,486
Prepaid Expenses 21,724 41,394
Investments 100,000 -
------------ -----------
TOTAL CURRENT ASSETS 1,581,614 862,974
FIXED ASSETS
Property, Equipment & Leasehold Improvements
Less Accumulated Depreciation & Amortization 372,326 274,403
------------ -----------
TOTAL FIXED ASSETS 372,326 274,403
OTHER ASSETS
Deposits 14,602 13,427
------------ -----------
TOTAL OTHER ASSETS 14,602 13,427
------------ -----------
TOTAL ASSETS $ 1,970,542 $1,152,804
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts Payable $ 716,742 $ 503,734
Accrued Liabilities 25,672 2,379
Amount Due Foreign Directors 613,775 614,924
Income Taxes Payable 375 375
Stock Subscription Payable - 69,865
------------ -----------
TOTAL CURRENT LIABILITIES 1,356,564 1,191,277
Stockholders' Equity
Common Stock, $.001 Par Value, 16,904 6,861
45,000,000 Shares Authorized
16,103,922 Shares Issued and Outstanding
(6,861,422 Shares in 1998)
Additional Paid-in Capital on Common 894,101 415,267
Preferred Stock, $0.001 Par Value 767 -
5,000,000 Shares Authorized
766,667 Shares Issued and Outstanding
Additional Paid-in Capital on Pfd. 109,233 -
Accumulated Deficit (407,027) (460,601)
------------ -----------
Total Stockholders' Equity 613,978 (38,473)
------------ -----------
Total Liabilities and Stockholders' Equity $ 1,970,542 $1,152,804
============ ===========
The accompanying notes are an integral part of these financial statements.
<PAGE> 69
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999, AND 1998
(in United States dollars)
(UNAUDITED)
</TABLE>
<TABLE>
DEC. 31, DEC. 31,
1999 1998
------------ -----------
<S> <C> <C>
Gross Sales $ 1,986,360 $ 1,907,182
Cost of Goods Sold 1,161,068 1,169,609
------------ -----------
Gross Profit 825,292 737,573
General & Administrative Expenses 895,540 900,451
------------ -----------
Income/(Loss) from Operations (70,218) (162,878)
Other Income/(Expenses) (120,000)
------------ -----------
Net Income Before Taxes (70,218) (282,878)
Provision for Income Taxes 125 125
------------ -----------
Net Income/(Loss) $ (70,373) $ (283,003)
============ ===========
Net Income/(Loss) per common Share - Basic (.004) (.04)
============ ===========
Weighted Average Shares Outstanding - Basic 16,566,735 6,796,205
============ ===========
Net Income/(Loss) per common Share - Diluted (.004) (.04)
============ ===========
Weighted Average Shares Outstanding - Diluted 17,566,735 7,796,205
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 70
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND
YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
(UNAUDITED)
(begin 8pt type)
<TABLE>
Common Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1996 4,015,936 $ 401,393 $ - $ - $ (412,290) $ (10,897)
Stock Issued on
04/08/97 5,500,000 550,000 (495,000) - - 55,000
Change in Par Value
From $.01 per Share
to $.001 per Share
- 06/16/97 (941,980) 495,000 446,980 - - -
Reverse Stock Split
on One for Ten
Basis - 06/16/97 (8,563,514) (8,462) 8,462 - -
Net Income/(Loss) (5,245) (5,245)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1997 951,422 $ 951 $ - $ 455,442 $ (417,535) $ 38,858
Stock Issued on
09/30/97 for Cash 800,000 8,000 - 4,000 - 12,000
Stock Issued on
09/30/97 for
Services 1,000,000 10,000 (10,000) - - -
Reorganization - Idaho
Shares Retired and
Company Dissolved
02/16/98 (2,751,422) (18,951) 10,000 (459,422) 417,535 (50,858)
Reorganization -
Nevada Formed
Shares issued
On 2/16/98 2,751,422 2,751 - 48,107 - 50,858
Stock Issued on
02/18/98 for Cash/Notes 600,000 600 - 59,400 - 60,000
Less Notes Received - - - (35,064) - (35,064)
Stock Issued
on 04/30/98
for Cash/Notes 400,000 400 - 39,600 - 40,000
Less Notes Received - - - (17,500) - (17,500)
Stock Issued on
05/18/98 for Cash/Notes 1,000,000 1,000 - 249,000 - 250,000
Less Notes Received - - - (16,166) - (16,166)
Stock Issued on
05/22/98 for Cash 100,000 100 - 24,900 - 25,000
Stock Issued
on 05/27/98 for Cash 1,210,000 1,210 - 301,290 - 302,500
Less Notes Received - - - (252,500) - (252,500)
Net Income/(Loss) - - - - (177,598) (177,598)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1998 6,061,422 $ 6,061 $ - $ 401,067 $ (177,598) $ (229,530)
----------- ---------- ------------ ----------- ----------- -----------
</TABLE>
(end 8pt type)
See accompanying notes and independent auditors' report
<PAGE> 71
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND
YEAR ENDED JUNE 30, 1999, 1998 AND 1997
(in United States dollars)
(UNAUDITED)
(begin 8pt type)
<TABLE>
Common Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, at
June 30, 1998 6,061,422 $ 6,061 $ - $ 401,067 $ (177,598) $ (229,530)
Stock Issued on
07/16/98 for
Services 800,000 800 - (800) - -
Cash Recd. For Stock
Issued on 09/30/97 - - - 15,000 - 15,000
Stock Issued on
02/17/99 for Cash 785,000 785 - 69,865 - 70,650
Stock Issued on
05/10/99 for Services 550,000 550 - (550) - -
Stock Issued on
05/18/99 for Cash 2,000,000 2,000 - 128,000 - 130,000
Stock Issued on
05/18/99 for Notes
Receivable 1,100,000 1,100 - (1,000) - -
Stock Issued on
02/17/99 for Wellux 4,000,000 4,000 - 4,000 - -
Stock Issued on
02/17/99 for Roosen 500,000 500 - 500 - -
Stock Issued on
02/17/99
for Notes Receivable 300,000 300 - (300) - -
Net Income/(Loss) - - - - (159,057) (159,057)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
June 30, 1999 16,096,422 $ 16,096 $ - $ 611,182 $ (336,655) $ (290,623)
Stock Issued on
08/30/99 for
settlement of suit
against Company's
President 7,500 8 - (8) - -
Cash Recd. For Stock
Issued on 05/18/99 (1) - - - 83,742 - 83,742
Cash Recd. For Stock
Issued on 09/16/99 800,000 800 - 199,185 - 199,985
Net Income/(Loss) (70,373) (70,373)
----------- ---------- ------------ ----------- ----------- -----------
Balance, at
December 31, 1999 16,903,922 $ 16,904 $ - $ 894,101 $ (407,028) $ (77,269)
=========== =========== ============ ============ ============ ===========
Preferred Stock Discount Additional Accum-
----------------------- On Common Paid-in ulated
Shares Amount Stock Capital Deficit Total
----------- ---------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, at
June 30, 1999 0 $ 0 $ - $ 0 $ 0 $ 0
Stock Issued on
11/22/99 for Cash 766,667 767 - 109,233 - 110,000
----------- ---------- ------------ ----------- ---------- -----------
Balance, at
December 31, 1999 766,667 $ 767 $ - $ 109,233 $ 0 $ 110,000
=========== ========== ============ =========== =========== ===========
</TABLE>
(end 8pt type)
See accompanying notes and independent auditors' report
<PAGE> 72
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
<TABLE>
DEC. 31, DEC. 31,
1999 1998
------------ -----------
<S> <C> <C>
CASH FLOWS PROVIDED BY/(USED IN)
OPERATING ACTIVITIES:
Net Income/(Loss) $ (70,373) $(283,003)
Non-Cash Items Included in Net Income:
Depreciation 46,508 47,047
Change in Prepaids (1,393) (41,394)
Change in Accounts Receivable (276,398) (340,367)
Change in Inventory (74,286) (276,470)
Change in Deposits (1,200) (12,946)
Change in Accrued Liabilities (18,666) 2,269
Change in Accounts Payable 94,265 443,822
Change in Income Tax Payable (125) 125
Change in Amounts Due Foreign Directors 1 222,959
------------ -----------
Net Cash Provided by/(Used in)
Operating Activities $ (301,666) $ (237,958)
Cash Flows Used In Investing Activities
Purchase of Property, Equipment &
Leasehold Improvements $ (88,783) (64,532)
------------ -----------
Net Cash Used For
investing Activities $ (88,783) (64,532)
Cash Flows from Financing Activities
Issuance of Preferred Stock $ 110,000 -
Stock Subscription Payable 69,865
Issuance of Common Stock 283,727 15,000
------------ -----------
Net Cash Provided by
Financing Activities $ 393,727 $ 84,865
Net Change In Cash 3,278 (217,625)
Cash At Beginning Of The Year 36,643 273,521
------------ -----------
Cash At End Of The Year $ 39,921 $ 55,896
============ ===========
Supplemental Cash Flow Information:
Interest Paid $ - $ -
============ ===========
Income Taxes Paid $ 250 $ -
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 73
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
- --------------------------------------------------------
The Company headquartered in Hartford, Connecticut, consists of two divisions,
both of whom are based in Hong Kong. Their first division is Wellux Industries
Limited, a Hong Kong corporation, which sources, designs and manufactures adult
products made from various forms of plastics, lingerie and leather goods. In
Europe, Wellux products are sold and distributed by Wellux B.V., a Dutch
company, located in Holland. This company is a wholly owned subsidiary of
Wellux Industries Limited. Wellux BV also owns VJMA Roosen, a Dutch Company,
specializing in product design, development, packaging and marketing of quality
cookware and high end cutlery. Their second division is a 49% interest in Klick
Ltd., a Hong Kong Corporation, which sources, designs and manufactures high
quality plastic household products, as well as household electronic, cutlery and
cookware products and sells and distributes these products in Europe and Asia.
The Company was originally incorporated in the State of Idaho on April 16, 1953.
In November 18, 1997, the Company formed a subsidiary with the same name in the
State of Nevada. On February 18, 1998, the Company merged its Idaho corporation
into its Nevada corporation (see Note 3).
The Company serves as a holding company for its core and subsidiaries'
operations. Reference herein to the Company include the Company and its
subsidiaries, unless the context otherwise requires.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------
Principal of Consolidation
- ----------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned Hong Kong subsidiary, Wellux Industries Limited and
Subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation. The Company does not consolidate its 49% interest in Klick
Ltd., bur was accounts for it under the equity method of accounting.
Accounting Method
- ------------------
The Company's financial statements are prepared using the accrual method of
accounting.
Recent Accounting Pronouncements
- ----------------------------------
The Financial Accounting Standards Board has issued certain pronouncements that
are effective as indicated below with respect to the fiscal years presented in
the consolidated financial statements.
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
<PAGE> 74
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------------
for earlier periods provided for comparative purposes is required. This
statement establishes guidelines for the reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. It requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displays with
the same prominence as other financial statements; it does not address issues of
recognition of measurement. The primary element of comprehensive income
applicable the Company is the foreign currency cumulative transaction
adjustment. The adoption of SFAS No. 130 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial for earlier periods provided for comparative
purposes is required. This statement establishes guidelines for the way the
public business enterprises report information about operating segments in
financial statements. This statement also establishes guidelines for related
disclosures about products and services, geographic areas and major customers.
The Company has evaluated the disclosure requirements of SFAS No. 131 and
believes the adoption will not have a material impact on its future disclosure
requirements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," is effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required. This statement revises employers' disclosures about pension and
other post-retirement benefit plans. It does not change the measurement or
recognition of those plans. It standardizes the disclosure requirements for
pensions and other post-retirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminate certain
disclosures that are no longer useful. The statement suggests combined formats
for presentation of pension and other post-retirement benefit disclosures. The
Company has evaluated the disclosure requirements of SFAS No. 132 and believes
the adoption will have no impact on its results of operations and financial
position.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," is
effective for fiscal years beginning after June 15, 1999. Restatement of
disclosures for earlier periods for comparative purposes is required. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company has
evaluated the disclosure requirements of SFAS No. 133 and believes that
implementation of the new standard will have no impact on its results of
operations and financial position.
<PAGE> 75
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------------
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sales by a Mortgage Banking
Enterprise" is effective for This statement amends SFAS 65, "Accounting for
Certain Mortgage Banking Activities" and requires that after the securitization
of mortgage loans held for sale, an entity engaged in mortgage banking
activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sell or hold these
investments. This statement conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a non-mortgage banking enterprise.
The Company has evaluated the disclosure requirements of SFAS No. 134 and
believes that implementation of the new standard will have no impact on its
results of operations and financial position.
SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical Correction" is
effective for fiscal years ending after February 15, 1999. Issued in February,
1999, this statement rescinds FASB Statement No. 75 "Deferral of the Effective
Date of Certain Accounting Requirements for Pension Plans of State and Local
Governmental Units." GASB Statement No. 25, "Financial reporting for Defined
Benefit Pension Plans and Note Disclosures for Defined Contribution Plans," was
issued November 1994, and establishes financial reporting standards for defined
benefit pension plans and for the notes to the financial statements of defined
contribution plans of state and local government entities. Statement 75 is,
therefore, no longer needed. This Statement also amends FASB Statement No. 35,
"Accounting and Reporting by Defined Benefit Pension Plan," to exclude from its
scope plans that are sponsored by and provide benefits for the employees of one
or more state and local government units. The Company has evaluated the
disclosure requirements of SFAS No. 135 and believes the adoption will have no
impact on its results of operations and financial position.
Foreign Currency Transactions
- -------------------------------
Foreign currency transactions during the year are translated into United States
dollars at the exchange rates prevailing at the transaction dates. Monetary
assets are liabilities denominated in foreign currencies at year end are
translated into United States dollars at approximately the market rates of
exchange prevailing at the balance sheet date.
Gains and Losses on exchange are shown in the Statement of Operations within the
General & Administrative Expenses section.
<PAGE> 76
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------------
Cash and Cash Equivalents
- ----------------------------
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Income Taxes
- -------------
The Company accounts for income taxes under the provisions of Statements of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates.
Inventories
- -----------
Inventories are stated at the lower of cost or market. Inventory cost is
determined using the first-in, first-out (FIFO) method and includes raw
materials, packaging, labor, and overhead. Market is based on net realizable
value.
Office Furniture and Equipment
- ---------------------------------
Office furniture and equipment are stated at cost. Major renewals and
betterments are capitalized to the asset accounts while the cost of maintenance
and repairs is charged against income as incurred. At the time assets are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the respective accounts and the resulting gain or loss is credited
to or charged against income. Depreciation for financial reporting purposes is
calculated by the straight-line method over the estimated useful lives of the
assets. The Modified Accelerated Cost Recovery System (MACRS) method is used
for income tax purposes.
Net Income/(Loss) Per Share
- ------------------------------
Net loss per share is computed based on the weighted average number of shares of
common stock outstanding.
<PAGE> 77
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------------
Use of Estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3 - REORGANIZATION
- --------------------------
In February 1998, the company reorganized as a Nevada Corporation. Beacon Light
Mining Company, an Idaho Corporation ("Beacon Light - Idaho") merged into its
wholly owned subsidiary Beacon Light Mining Company, a Nevada Corporation
("Beacon Light - Nevada"), which became the surviving corporation. Prior to the
merger, Beacon Light - Idaho had 2,751,422 shares issued and outstanding and
Beacon Light - Nevada had 1 share issued and outstanding that was owned by
Beacon Light - Idaho. After the merger the 2, 751,422 common shares in Beacon
Light - Idaho were converted to 2,751,422 common shares in Beacon Light -
Nevada. The 1 share in Beacon Light - Nevada owned by Beacon Light - Idaho was
cancelled and returned to the status of un-issued. Thereafter, the Company
changed its name to Beacon Light Holding Corporation.
In connection with the merger, all assets and liabilities of Beacon Light -
Idaho were assumed by Beacon Light - Nevada and all assets and liabilities of
the Idaho and Nevada Corporations were combined at their historical amounts in a
manner similar to that in pooling of interests accounting. Additionally, prior
accumulated deficit was netted with additional paid-in- capital in conjunction
with a charge in par value of the common stock to effectuate the transfer of
$50,858 in equity.
NOTE 4 - ACQUISITIONS
- ------------------------
In September 1999, Wellux Industries Ltd. the Company's wholly owned subsidiary,
established a new company in joint venture with the publishing group Dimensions
Holding Asia Ltd. called Kiss Mailorder ltd. Under the joint venture
agreement, Wellux holds a fifty percent interest in Kiss Mailorder, which will
be the printed media, mail-order arm of Wellux Industries for the direct
marketing of Wellux's products.
<PAGE> 78
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 4 - ACQUISITIONS (CONTINUED)
- -------------------------------------
In September 1999, the Company acquired a forty-nine percent ownership interest
in Klick Ltd., a Hong Kong Corporation, for a soon to be issued two million four
hundred fifty thousand newly issued Rule 144 common shares of Beacon Light
Holding Corporation. The Company acquired its forty-nine percent ownership
interest in Klick Ltd., thirty percent from Ma Yuk King a Hong Kong resident,
fifteen percent from Drilford Ltd. a Hong Kong Corporation, and four percent
from KB Group, a British Virgin Island Corporation that owns the remaining
fifty-one percent interest. Klick Ltd. located in Hong Kong, does source, design
and manufacture high quality plastic household products, as well as household
electronic, cutlery, and cookware products. Klick's clients consist of
wholesalers, importers, distributors, department stores, retail chains and
direct marketing companies in Europe and Asia. The Company has have an option
until September 16, 2000 to purchase the remaining fifty-one percent interest in
Klick from the KB Group. The transaction was accounted for under the equity
method of accounting.
NOTE 5 - INCOME TAXES
- -------------------------
The Company has a net operating loss available carryover of up to 20 years for
Federal purposes. Pursuant to Internal Revenue Code Section 382 and the
regulations thereunder, the amounts of utilizable carryover may be limited as a
rsult of ownership changes or even eliminated if business continuity
requirements are not met. No carrybacks are available for State purposes while
carryforwards of the loss are permitted for up to five (5) years.
There were no temporary differences allowing no deferred tax liabilities to
arise.
Components of Income Tax Expenses are as follows:
<TABLE>
December 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
CURRENT
Federal $ - $ -
State 62.50 62.50
---------- ----------
Net Provision/(Benefit) for Income Taxes $ 62.50 $ 62.50
========== ==========
</TABLE>
<PAGE> 79
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 6 - STOCKHOLDERS' EQUITY
- ---------------------------------
As of December 31, 1999, the Company had 16,903,922 shares issued and
outstanding. Prior to July 1, 1997, the Company had 401,422 shares, as adjusted
for reverse splits, issued and outstanding. During the quarter ended September
30, 1999 and fiscal years ended June 30, 1999, 1998, and 1997, the Company
issued an additional 16,502,500 shares of common stock.
Shares were issued for cash, services, notes receivable, and corporate
acquisitions during the aforementioned years as follows:
<TABLE>
Shares Issued at
---------------------------------------------------
Dec. 31, June 30, June 30, June 30, Total
1999 1999 1998 1997 by Type
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Cash 800,000 2,785,000 2,509,696 550,000 6,644,696
Services - 1,350,000 1,000,000 - 2,350,000
Notes Receivable - 1,400,000 1,600,304 - 3,000,304
Corporate
Acquisition - 4,500,000 - - 4,500,000
Legal Settlement 7,500 - - - 7,500
--------- --------- --------- --------- ----------
Total by
Quarter/Year 807,500 10,035,000 5,110,000 550,000 16,502,500
Outstanding Shares
Prior to July 1, 1996 401,422
----------
Total Outstanding
Shares 16,903,922
==========
</TABLE>
Each share of common stock is entitled to one vote. The stock is currently
traded through the National Quotation Bureau's "pink sheets" under the symbol
BLHG.
On July 13, 1998, the Company issued 1,000,000 stock purchase warrants to an
investment banking firm in connection with the sale and promotion of the
Company's stock. Each warrant allows the holder to purchase one share of common
stock at $0.13 per share. The warrants expire on July 13, 2001.
<PAGE> 80
BEACON LIGHT HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLITATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
(in United States dollars)
(UNAUDITED)
NOTE 7 - COMMITMENTS
- -----------------------
Leases
- ------
The Company entered into an operating lease agreement for office space. The
lease term is one year and was renewed on March 1, 2000.
Future minimum lease payments under the operating lease has a remaining lease
term in excess of one year as of December 31, 1999 are as follows:
Six Months Ending
December 31,
------------------
2000 $ 105,000
2001 85,000
2002 54,000
2003 54,000
2004 27,000
---------
$ 325,000
=========
NOTE 8 - FOREIGN CURRENCY TRANSACTION
- ----------------------------------------
Foreign currency transactions during the six months ended December 31, 1999
and 1998 are translated into United States dollars at the exchange rates ruling
at the translation dates. Monetary assets and liabilities denominated in foreign
currencies at the year end are translated into United States dollars at
approximately the market rates of exchange ruling at the balance sheet rate. For
six months ended December 31, 1999 the Company used 7.7596 and for six months
ended December 31, 1998 the Company used 7.7451 as the exchange rate between
Hong Kong Dollars and United States Dollars.
NOTE 9 - RESULTS OF OPERATIONS
- ---------------------------------
The separate results of the Company and Wellux Industries Limited and
Subsidiaries(Wellux BV) for the six months ended December 31, 1998 and December
31, 1999 are summarized as follows:
<TABLE>
Six Months Ended Six Months Ended
December 31, 1999 December 31, 1998
---------------------------------- ----------------------------------
Company Wellux Combined Company Wellux Combined
- ---------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales Revenues $ - $1,986,360 $1,986,360 $ - $1,907,182 $1,907,182
Net Income/(Loss) (115,357) 44,859 (70,498) (287,853) 4,850 (283,003)
</TABLE>
<PAGE> 81
PART III
ITEM 1. INDEX TO EXHIBITS.
- ---------- -----------------------------
EXHIBIT NO. DESCRIPTION OF DOCUMENT
EX-3.1 Articles of Incorporation - Idaho
EX-3.1(i) Amendment to Articles of Incorporation
EX-3.1(ii) Articles of Incorporation - Nevada
EX-3.1(iii) Plan and Agreement of Merger
EX-3.1(iv) Amendment to Articles of Incorporation
EX-3.1(v) Amendment to Articles of Incorporation
EX-3.2 By-Laws
EX-3.2(i) Amendment to By-Laws
EX-4.1 Form of Common Stock Certificate
EX-4.1(i) Certificate of Designation
EX-10.1 Stock Option Plan
EX-10.2 Employment Agreement of Jerry Gruenbaum
EX-10.3 Employment Agreement of Hans Lodders
EX-10.4 Employment Agreement of Ronald Steenbergen
EX-10.5 Acquisition Agreement of Casin Magnetic Manufactory
EX-10.6 Acquisition Agreement of Wellux Industries Ltd.
EX-10.7 Acquisition Agreement of Klick Ltd.
EX-10.8 Letter of Intent - Hongtex Hong Kong
EX-21.1 List of Subsidiaries of the registrant
EX-23.1 Consent of Hoffski & Pisano, CPA
EX-23.1(i) Consent of Raymond Ching & Co., CPA
EX-27.1 Financial Data Schedule
ITEM 2. DESCRIPTION OF EXHIBITS.
Not Applicable
SIGNATURE
---------
In accordance with Section 12 of the Securities and Exchange Act of 10934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
BEACON LIGHT HOLDING CORPORATION
Date: March 10, 2000 By: /s/ Jerry Gruenbaum
----------------------------------------------
Jerry Gruenbaum, President
82
EX-3.1
ARTICLES OF INCORPORATION - IDAHO
ARTICLES OF INCORPORATION
-------------------------
of
BEACON LIGHT MINING COMPANY
---------------------------
KNOW ALL MEN BVY THESE PRESENTS: That we, the undersigned, all of whom are
citizens and residents of the United States of America and all of full age, have
this day voluntarily associated ourselves together for the purpose of forming a
corporation under the laws of the State of Idaho, and we hereby certify:
I.
That the name of this corporation shall be BEACON LIGHT MINING COMPANY.
II.
That the purpose for which this corporation is formed are as follows:
(a) To purchase, acquire, own, enter, lease, and rent mines, mining
claims and mineral lands of every kind, nature and description; also to
purchase, acquire, enter, own, lease or rent mill sites, water rights, timber
claims or other timber lands, prospect and develop mines and mineral lands of
every kind, nature and description, either for itself or for other companies,
corporations or individuals upon such terms and for such remuneration as it
shall deem fit and proper, and to accept, take and hold mineral lands, and
claims of every kind, nature and description, either as an entirety or any
interest in the same; and to buy, sell, own or control stock of other
corporations as it deems fit and proper. To do everything that may be proper in
the conduct of its business in the way of developing, prospecting, locating,
acquiring, buying and selling, renting and leasing, mineral lands and mining
claims of every kind, nature, and description, and working such mines, and the
production of ores and mineral therefrom and in reducing such ores to the most
merchantable value, and in so doing the same to contract, buy, build, and sell,
own and operate all necessary mills, smelters, machinery, roads, railroads,
either steam or electric, tramways, ditches, flumes, and such other property as
it shall deem fit and necessary for carrying out the objects herein stated. To
buy, sell, or lease mines and mining property of all kinds and property of every
kind, nature and description useful or necessary in operating and maintaining
the same and in reducing the ores and refining the minerals taken therefrom. To
erect buildings, sawmills, boarding houses and hotels, and to conduct the same.
And to conduct mercantile business of all kinds and other adjuncts to mines and
concentrating mills; and to engage in steam and other transportation, road
building and engineering, freighting and carrying.
(b) To conduct a general mining, milling and smelting and reducing
business.
<PAGE> 83
(c) To exercise the right of eminent domain according to law, and to
condemn rights of way for tunnels, shafts, hoisting works, dumps, cuts, ditches,
canals, reservoirs, storage basins, dams, roads, railroads, and tramways
incident, necessary or convenient for the uses and purposes and objects of this
corporation, and do all things incident to the general business of this
corporation, and do all things incident to the general business of this
corporation in the State of Idaho, and the other states and territories of the
United States and elsewhere that this corporation may desire or conclude to do
business.
(d) To buy and sell ores, bullion, metals and concentrates and tailings
and other materials and to reduce ores and minerals for pay.
(e) To purchase, use and own and enjoy any and all franchises useful or
beneficial for the prosecution of the business of this corporation.
(f) To borrow money on its notes, bonds and other obligations for the
general purposes of this corporation and to mortgage, pledge and give in trust
any and all of its property to secure the payment thereof.
(g) To do and perform any and all other things that may be found
necessary or convenient to carry out the objects of this corporation.
III.
The principal place of business of this corporation shall be at Mullan,
Shoshone County, Idaho, with power to establish branch offices elsewhere in the
United States of America, or the Dominion of Canada, at such places as the said
corporation, by its board of directors, may direct. Meetings of the
stockholders, either regular or special, may be called and held at any place
without the State of Idaho and within the United States as by-laws may from time
to time provide.
IV.
The existence of this corporation shall be perpetual.
V.
The number of its directors shall be not less than three and not more than
thirteen in number. The first board of directors shall be three in number and
the board of directors, if authorized by the by-laws of the corporation, shall
have the right to engage the board to not more than seven in number, but no
other addition thereto shall be made except by the stockholders at an annual
meeting or at a special meeting called for that purpose.
The names of the directors who are to act for the first corporate year
and/or until their successors are elected and qualified, shall be determined and
they shall be designated at the first meeting of the stockholders.
VI.
The amount of capital stock of this corporation is fixed at $375,000.00
divided into 1,500,000 shares of the par value of twenty-five cents per share;
and shall be non-assessable.
VII.
The amount of the capital stock which has been actually subscribed is 5
shares and the persons by whom it has been subscribed are as follows, to wit:
<PAGE> 84
NAME OF SUBSCRIBER No. of Shares AMOUNT
- -------------------- --------------- ------
Henry George 1 $ .25
Edward B. Thompson 1 $ .25
C. P. Jeager 1 $ .25
H. J. Clemons 1 $ .25
Walter H. Hanson 1 $ .25
IN WITNESS WHEREOF, the parties have hereunto set their hands and seal this
4th day of March, A.D. 1953.
- ---
/s/H.J. Clemons (SEAL)
- ---------------------------------
/s/Walter H. Hanson (SEAL)
- ----------------------------------
/s/C. P. Jeager (SEAL)
- ----------------------------------
/s/Henry George (SEAL)
- ---------------------------------
/s/Edward Thompson (SEAL)
- ---------------------------------
/s/Harry Nobles (SEAL)
- ---------------------------------
STATE OF WASINGTON)
) ss.
County of Spokane )
On this 20th day of March, 1953, before me, a Notary Public in and for the
above named State, personally appeared Walter H. Hanson, known to me to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in Spokane, Washington, the day and year in this certificate
first above written.
/s/Jowles
-------------
Notary Public for the State of Washington
Residing in Spokane.
<PAGE> 85
STATE OF WASINGTON)
) ss.
County of Spokane )
On this 20th day of March, 1953, before me, a Notary Public in and for the
above named State, personally appeared H. J. Clemons, known to me to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in Spokane, Washington, the day and year in this certificate
first above written.
/s/Jowles
-------------
Notary Public for the State of Washington
Residing in Spokane.
STATE OF WASINGTON)
) ss.
County of Spokane )
On this 15th day of April, 1953, before me, a Notary Public in and for the
above named State, personally appeared Henry George, known to me to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in Spokane, Washington, the day and year in this certificate
first above written.
/s/E. L. Ferguson
-----------------------
Notary Public for the State of Washington
Residing in Spokane.
STATE OF WASINGTON)
) ss.
County of Spokane )
On this 14th day of April, 1953, before me, a Notary Public in and for the
above named State, personally appeared Henry Nobles, known to me to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in Spokane, Washington, the day and year in this certificate
first above written.
/s/Evert Houing
--------------------
Notary Public for the State of Washington
Residing in Spokane.
<PAGE> 86
STATE OF WASINGTON)
) ss.
County of Spokane )
On this 14th day of April, 1953, before me, a Notary Public in and for the
above named State, personally appeared Edward B. Thompson, known to me to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in Spokane, Washington, the day and year in this certificate
first above written.
/s/Bundlers
---------------
Notary Public for the State of Washington
Residing in
STATE OF WASINGTON)
) ss.
County of Spokane )
On this 14th day of April, 1953, before me, a Notary Public in and for the
above named State, personally appeared Chas. P. Jaeger, known to me to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in Spokane, Washington, the day and year in this certificate
first above written.
/s/Luise Fritekie
----------------------
Notary Public for the State of Washington
Residing in Spokane.
STATE OF WASINGTON)
) ss.
County of Spokane )
H. J. Clemons, being duly sworn, deposes and says that he is an
incorporator of the BEACON LIGHT MINING COMPANY, an Idaho Corporation, which
will have its principal place of business at Mullan in Shoshone County, State of
Idaho; that he is one of those actively engaged in the incorporation of said
business and is acquainted with the other incorporators and subscribers to its
capital stock; and that with the exception of affiant, all others are residents
of the State of Washington. That affiant is and expects to continue to be a
resident of Mullan, Shoshone County, State of Idaho. That affiant and all other
incorporators and prospective stockholders of said Company are over the legal
age, as well as being citizens of the United States.
It is expected, although not yet determined, that the principal place of
business of said corporation will be in the village of Mullan, Shoshone County,
State of Idaho, but in any event it will be in Shoshone County.
At this time the Company has no property and does not for some time at
least, expect to acquire and operate any.
<PAGE> 87
It will be, wherever its filing until development starts, a non-productive
company and as affiant is advised by counsel, there is no charge levied against
a non-productive company. The Company is not officially organized, but is now
in process of organization and at the present time it is not doing business and
does not expect to be doing any business in Idaho until action shall be taken by
the Board of Directors of the Company if and when they decide to do business in
Idaho, and as aforesaid, this has not yet been done.
/s/ H.J. Clemons
- -----------------------
SUBSCRIBED AND SWORN TO before me this 21st day of March, 1953.
/s/Luise Fritekie
----------------------
Notary Public for the State
of Washington, residing in Spokane.
88
EX-3.1(i)
ARTICLES OF AMENDMENTS - IDAHO
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF THE
BEACON LIGHT MINING COMPANY
KNOW ALL MEN BY THESE PRESENTS: That at a special meeting of the
shareholders of the BEACON LIGHT MINING COMPANY, held at 326 Wiggett Building,
Coeur d'Alene, Idaho, on the 23rd day of September, 1964, which meeting was
specifically called for the purpose of amending the charter of the company as
hereinafter set forth, and held upon waiver of notice signed by all the
shareholders of said Company, it was decided to change the principal place of
business from Mullan, Idaho, to Wallace, Idaho, and to modify the capital
structure of the company and to that end resolutions were duly made, seconded
and adopted by the unanimous vote of all issued and outstanding shares of the
company, amending Article III and IV of said Articles to read as follows:
"III.
The principal place of business of this corporation shall be at Wallace,
Shoshone County, Idaho, with power to establish branch offices elsewhere in the
United States of America, or the Dominion of Canada, at such places as the said
corporation, by its board of directors, may direct. Meetings of the
stockholders, either regular or special, may be called and held at any place
without the State of Idaho and within the United States as by-laws from time to
time provide."
"VI.
The amount of capital stock of this corporation is fixed at $375,000.00 divided
into 3,000,000 shares of the par value of twelve and one-half cents per share;
and shall be non-assessable."
IN WITNESS WHEREOF, The President and Secretary of said Corporation set forth
their hands this 26 day of September, 1964.
/s/George De Nise
--------------------------------
President
/s/Earl Bushnell
--------------------------------
Secretary
<PAGE> 89
STATE OF IDAHO )
) ss.
County of Shoshone)
On this 26 day of September, 1964, before me, the undersigned a Notary
Public in and for the State of Idaho, personally appeared GEORGE DE NISE, and
EARL BUSHNELL, President and Secretary, respectively of the BEACON LIGHT MINING
COMPANY, known to be the persons whose names are subscribed to the within
instrument, and acknowledged to me that said corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
in this certificate first above written.
/s/Hull
-----------
Notary Public in and for the State of Idaho
Residing in Wallace, Idaho.
90
EX-3.1(ii)
ARTICLES OF INCORPORATION - NEVADA
ARTICLES OF INCORPORATION OF
BEACON LIGHT MINING COMPANY INC.
FIRST. The name of the corporation is:
BEACON LIGHT MINING COMPANY INC.
SECOND. The resident agent for this corporation shall be:
CORPORATE SERVICE CENTER, INC.
The address of said agent, and the principal or statutory address of this
corporation in the State of Nevada, shall be 1475 Terminal Way, Suite E, Reno,
Nevada 89502, located in Washoe County, State of Nevada. This corporation may
maintain an office, or offices, in such other place or places within or without
the State of Nevada as may be from time to time designated by the Board of
Directors, or by the bylaws of said corporation, and that this corporation may
conduct all corporation business of every kind and nature, including the holding
of all meetings of directors and stockholders, outside the State of Nevada as
well as within the State of Nevada.
THIRD. The objects for which this corporation is formed are as follows: to
engage in any lawful activity.
FOURTH. That the total number of voting common stock authorized that may be
issued by the corporation is FIFTY MILLION (50,000,000) shares of stock with
$0.001 par value, and no other class of stock shall be authorized. Said shares
may be issued by the corporation from time to time for such considerations as
may he fixed from time to time by the Board of Directors.
FIFTH. The governing board of this corporation shall be known as directors, and
the number of directors may from time to time he increased or decreased in such
manner as shall be provided by the bylaws of this corporation, providing that
the number of direc-tors shall not be reduced to less than one (1). The name and
post office address of the first Board of Directors shall be one (1) in number
and listed as follows: TREVOR C. ROWLEY, 1475 Terminal Way, Suite E, Reno, NV
89502.
SIXTH. The capital stock, after the amount of the subscription price, or par
value, has been paid in, shall not be subject to assessment to pay the debts of
the corporation.
SEVENTH. The name and post office address of the Incorporator signing the
Articles of Incorporation is as follows: TREVOR C. ROWLEY, 1475 Terminal Way,
Suite E, Reno, NV 89502.
EIGHTH. The corporation is to have perpetual existence.
<PAGE> 91
NINTH. No director or officer of the corporation shall be personally liable to
the corpora-tion or any of its stockholders for damages for breach of fiduciary
duty as a director or officer or for any act or omission of any such director or
officer; however, the foregoing provision shall not eliminate or limit the
liability of a director or officer for (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (b) the payment
of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article by the stockholders of the corporation
shall be prospective only and shall not adversely affect any limitation on the
personal liability of a director or officer of the corporation for acts or
omissions prior to such repeal or modification.
TENTH. This corporation reserves the right to amend, alter, change or repeal any
provi-sion contained in the Articles of Incorporation, in the manner now or
hereafter prescribed by statute, or by the Articles of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a corporation pursuant to the General Corporation Laws of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this Tuesday, November 18, 1997.
By: /s/ Trevor C. Rowley
- ----------------------------
TREVOR C. ROWLEY, Incorporator
STATE OF NEVADA)
WASHOE COUNTY )
On this Tuesday, November 18, 1997 in Reno, Washoe County, Nevada, before
me, the undersigned, a Notary Public in and for Washoe County. State of Nevada.
personally appeared TREVOR C ROWLEY. known to me to be the person whose name is
subscribed to the foregoing document and acknowledged to me that he executed the
same.
/s/D.K. Melius
- ---------------
Notary Public
92
EX-3.1(iii)
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER
This Plan and Agreement of Merger entered into this 3rd day of December
1997 by and among Beacon Light Mining Company, an Idaho Corporation,
incorporated on April 16, 1953 (hereinafter "Beacon Light Idaho") and Beacon
Light Mining Company, a Nevada Corporation, incorporated on November 18, 1997,
and as of February 17, 1998 is officially known as Beacon Light Holding
Corporation (hereinafter "Beacon Light Nevada"), are sometimes referred to
herein as the constituent corporations.
BACKGROUND OF AGREEMENT
WHEREAS, Beacon Light Idaho on 18th day of November 1997 incorporated a
subsidiary corporation, Beacon Light Mining Company in the State of Nevada,
whose name on this date has been changed to Beacon Light Holding Corporation
("Beacon Light Nevada"); and
WHEREAS, Beacon Light Idaho is no longer in the exploration and development of
potential silver mining properties in the northern part of Idaho and does not do
any business in the State of Idaho; and
WHEREAS, Beacon Light Idaho has authorized capital stock consisting of
10,000,000 shares of Common Stock, of which 2,751,422 shares are issued and
outstanding; and
WHEREAS, Beacon Light Nevada has authorized capital stock consisting of
50,000,000 shares of Common Stock, of which 1 shares is issued and outstanding
and is owned by Beacon Light Idaho; and
WHEREAS, the Board of Directors of Beacon Light Idaho, have determined that
it was in the best interest of Beacon Light Idaho to be incorporated in the
State of Nevada to avail itself of the corporate and securities laws available
in the State of Nevada; and
WHEREAS, the Board of Directors of Beacon Light Idaho and Beacon Light
Nevada have determined that a merger of Beacon Light Idaho with and into Beacon
Light Nevada is in the best interest of Beacon Light Idaho and Beacon Light
Nevada and such companies desire to set forth in their agreement their entire
understanding respecting such merger (hereinafter "the merger"); and
WHEREAS, at a special meeting of the stockholders of Beacon Light Idaho
held at the law offices of Verdiramo & Verdiramo, P.A. on this February 16, 1998
approved the change of domicile for Beacon Light Idaho from Idaho to Nevada (a
copy of said minutes is attached as Exhibit A and incorporated herein); and
WHEREAS, the officers and directors of Beacon Light Idaho at all times
herein were and are the same as Beacon Light Nevada; and
WHEREAS, the parties intend that the merger qualify as a tax-free
reorganization within the meaning of the provisions of Section 368 of the
Internal Revenue Code of 1986 as amended (the "Code"); and
<PAGE> 93
WHEREAS, on February 16, 1998 Beacon Light Idaho merged into Beacon Light
Nevada, and the parties are desirous of reducing their merger to a written
agreement for the purpose of filing with the respective Secretary of State for
the State of Idaho in accordance with Sec. 30-1-1101 of the Idaho Code and the
Secretary of State for the State of Nevada in accordance with Chapter 92A of the
Nevada Revised Statutes;
Now, therefore, in consideration of the mutual covenants and agreements
herein contained, the parties herein, intending to be legally bound hereby agree
as follows:
ARTICLE I
MERGER OF BEACON LIGHT IDAHO INTO BEACON LIGHT NEVADA
-----------------------------------------------------
SECTION 1.1 CLOSING
-------
The closing of the transaction contemplated by this Agreement shall be
deemed to have occurred and be effective on February 16, 1998.
SECTION 1.2 MERGER
------
As of the closing date as defined in Section 1.1 above, Beacon Light Idaho
merged into Beacon Light Nevada, which became the surviving corporation (the
"Surviving Corporation") with the clear understanding of the Constituent
Corporations that as of that date, the separate existence of Beacon Light Idaho
shall cease, and Beacon Light Nevada shall thereafter posses all of the rights,
privileges, immunities, powers, licenses, permits and franchises, both of public
and private nature, and all the property, real, personal and mixed, all debts
due on any account and all chooses in action belonging to or inuring to either
of the Constituent Corporations, and shall be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations. Any claim
existing or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted as if the Merger had not taken place or the
Surviving Corporation may be substituted in its place. The Merger shall impair
neither the rights of creditors nor any liens upon the property of either of the
Constituent Corporations.
ARTICLE II
ARTICLES, BYLAWS, DIRECTORS AND OFFICERS
----------------------------------------
SECTION 2.1 BEACON LIGHT ARTICLES AND BY-LAWS.
--------------------------------------
The Articles of Incorporation and By-Laws of Beacon Light Nevada shall be
the Articles of Incorporation and By-Laws of the Surviving Corporation until
amended in accordance with applicable Nevada laws.
SECTION 2.2 BEACON LIGHT'S DIRECTORS AND OFFICERS.
------------------------------------------
Upon the closing and consummation of the Merger, the directors and officers
of Beacon Light Idaho who are the same as the directors and officers of Beacon
Light Nevada, shall become the directors and officers of the Surviving
Corporation.
<PAGE> 94
SECTION 2.3 CHAIRMAN OF THE BOARD AND PRESIDENT.
-----------------------------------------
Jerry Gruenbaum shall be appointed as Chairman of the Board of Directors
and Jerry Gruenbaum shall be appointed as President of the Surviving Corporation
as soon as reasonably practicable following consummation of the Merger.
ARTICLE III
CONVERSION AND CANCELLATION OF SHARES
-------------------------------------
After the closing date as defined in Section 1.1 above, there shall be
no further registrations of transfer on the stock transfer books of the
Surviving Corporation of the shares of Beacon Light Idaho Common Stock, which
were outstanding immediately prior to the closing date. If after the closing
date, shares of Beacon Light Idaho Common Stock are presented to the Surviving
Corporation, they shall be cancelled and exchanged for shares of Surviving
Corporation Common Stock.
ARTICLE IV
CONSIDERATION
-------------
For and in consideration of the merger of Beacon Light Idaho into Beacon
Light Nevada, Beacon Light Nevada shall cause to be issued to the present
stockholders of Beacon Light Idaho 2,751,422 shares of Beacon Light Nevada
Common Stock. Said 2,751,422 shares of Beacon Light Nevada Common Stock shall
represent all of the outstanding shares of Beacon Light Nevada as of the date of
the merger. The one share of Beacon Light Nevada owned by Beacon Light Idaho
immediately prior to the closing shall by virtue of this merger, be cancelled
and returned to the status of authorized and un-issued shares.
ARTICLE V
MERGER PROCEDURE
----------------
Upon execution of this Plan and Agreement of Merger, it shall be filed by
Beacon Light Idaho with the Secretary of State of the State of Idaho in
accordance with Sec. 30-1-1101 of the Idaho Code and by Beacon Light Nevada with
the Secretary of State of the State of Nevada in accordance with Chapter 92A of
the Nevada Revised Statutes and recorded in accordance with laws, which may
apply to mergers within their respective states.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BEACON LIGHT IDAHO
----------------------------------------------------
In order to induce Beacon Light Nevada to enter into this Agreement and to
consummate the transactions contemplated hereby, Beacon Light Idaho makes the
following representations and warranties to Beacon Light Nevada:
SECTION 6.1 ORGANIZATION AND GOOD STANDING.
----------------------------------
a. On the date of closing, Beacon Light Idaho was a corporation duly
organized, validly existing and in good standing under the laws of the State of
Idaho.
b. Beacon Light Idaho has the power to carry on its business as and
where conducted and is entitled to own, lease or operate its business assets.
<PAGE> 95
c. Beacon Light Idaho has delivered to Beacon Light Nevada complete and
correct copies of its Articles of Incorporation, as amended, and By-Laws, as in
effect on the date of closing.
d. As of the date of closing, the authorized capital stock of Beacon
Light Idaho consists of 10,000,000 shares of Common Stock, of which 2,751,422
shares were issued and outstanding.
SECTION 6.2 AUTHORIZATION OF AGREEMENT.
-----------------------------
This Agreement has been duly authorized by the requisite corporate and
shareholder action on the part of Beacon Light Idaho. A Copy of the minutes of
the Special Meeting of the shareholders of Beacon Light Idaho held this 16th day
of February is attached as Exhibit A and incorporated herein. This Agreement
has been duly executed and delivered by Beacon Light Idaho and constitutes the
legal, valid and binding obligation of Beacon Light Idaho enforceable against
Beacon Light Idaho in accordance with its terms.
SECTION 6.3 BEACON LIGHT IDAHO SHARES.
-----------------------------
Each issued share of Beacon Light Idaho Common Stock is validly issued,
fully paid and non-assessable, and each outstanding share of Beacon Light Idaho
Common Stock is entitled to one vote. No such shares were issued in violation
of any pre-emptive rights.
SECTION 6.4 NO CONFLICT
------------
(a) The consummation of the transactions contemplated by this Agreement will
not result in the breach of any term or provision of or constitute a
default under any indenture, mortgage, deed of trust, or other material
agreement or instrument to which Beacon Light Idaho is a party.
(b) The execution, delivery and performance by Beacon Light Idaho of this
Agreement and the consummation of the transactions contemplated hereby by Beacon
Light Idaho requires no consent, approval, order or authorization of,
action by or in respect of, registration or filing with, any governmental body,
court, agency, official or authority other than (i) the filing of the applicable
Articles of Merger; and (ii) such other filings or registrations with, or
authorizations, consents or approval of, any Governmental Body, the failure of
which to make or obtain would not materially adversely affect the ability of
Beacon Light Nevada or Beacon Light Idaho to consummate the transactions
contemplated hereby.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BEACON LIGHT NEVADA
-----------------------------------------------------
In order to induce Beacon Light Idaho to enter into this Agreement and to
consummate the transactions contemplated hereby, Beacon Light Nevada makes the
following representations and warranties to Beacon Light Idaho:
SECTION 6.1 ORGANIZATION AND GOOD STANDING.
----------------------------------
a. On the date of closing, Beacon Light Nevada was a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada.
<PAGE> 96
b. Beacon Light Nevada has the power to carry on its business as and
where conducted and is entitled to own, lease or operate its business assets.
c. Beacon Light Nevada has delivered to Beacon Light Idaho complete and
correct copies of its Articles of Incorporation, as amended, and By-Laws, as in
effect on the date of closing.
d. As of the date of closing, the authorized capital stock of Beacon
Light Nevada consists of 50,000,000 shares of Common Stock, of which one share
was issued and outstanding.
SECTION 6.2 AUTHORIZATION OF AGREEMENT.
-----------------------------
This Agreement has been duly authorized by the requisite corporate and
shareholder action on the part of Beacon Light Nevada. This Agreement has been
duly executed and delivered by Beacon Light Nevada and constitutes the legal,
valid and binding obligation of Beacon Light Nevada enforceable against Beacon
Light Nevada in accordance with its terms.
SECTION 6.3 BEACON LIGHT NEVADA SHARES.
------------------------------
The one issued share of Beacon Light Nevada Common Stock is validly issued,
fully paid and non-assessable, and the one outstanding share of Beacon Light
Nevada Common Stock is entitled to one vote. No such share was issued in
violation of any pre-emptive rights.
SECTION 6.4 NO CONFLICT
------------
(c) The consummation of the transactions contemplated by this Agreement will
not result in the breach of any term or provision of or constitute a
default under any indenture, mortgage, deed of trust, or other material
agreement or instrument to which Beacon Light Nevada is a party.
(d) The execution, delivery and performance by Beacon Light Nevada of this
Agreement and the consummation of the transactions contemplated hereby by Beacon
Light Nevada requires no consent, approval, order or authorization of,
action by or in respect of, registration or filing with, any governmental body,
court, agency, official or authority other than (i) the filing of the applicable
Articles of Merger; and (ii) such other filings or registrations with, or
authorizations, consents or approval of, any Governmental Body, the failure of
which to make or obtain would not materially adversely affect the ability of
Beacon Light Nevada or Beacon Light Idaho to consummate the transactions
contemplated hereby.
ARTICLE VII
MISCELLANEOUS PROVISIONS
------------------------
SECTION 7.1 APPLICATION.
------------
This Agreement shall be construed and enforced in accordance with the laws
of the State of Nevada, except as to any technical Idaho requirement of
corporate merger pertaining to Beacon Light Idaho.
<PAGE> 97
SECTION 7.2 NOTICES.
--- --------
All notices, requests, demands and other communications called for or
contemplated hereunder shall be in writing and shall be deemed to have been
dully given when (i) hand delivered; (ii) sent by telegram, fax, telex or wire
followed by a confirming letter; or (iii) sent by United States certified or
registered mail, postage prepaid, addressed to the parties, their successors in
interest, or their assignees at the following address (or at such other
addresses as the parties may designate by like written notice):
Beacon Light Holding Corporation
100 Pearl Street - 14th Floor
Hartford, Connecticut 06103
Phone Number (860) 249-7008
Fax Number (860) 249-7001
SECTION 7.3 PAYMENT OF EXPENSES.
----------------------
Beacon Light Nevada shall pay all fees and expenses incurred by it in
connection with the preparation, negotiation, execution, delivery and completion
of this Agreement and the transactions contemplated hereunder.
SECTION 7.4 ASSIGNMENT.
-----------
This Agreement shall not be assigned by any party without the written
consent of the other party hereof.
SECTION 7.5 COUNTERPARTS.
-------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
SECTION 7.6 CAPTIONS.
---------
Captions used herein are for convenience of reference only; such captions
are not a part hereof and shall not be used in construing this Agreement.
SECTION 7.7 ENTIRE AGREEMENTS.
-------------------
This Agreement contains the entire agreement of the parties regarding the
subject matter hereof. It supersedes any and all other agreements, either oral
or in writing, between the parties hereto with respect to the subject matter of
this Agreement. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, oral or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are not
embodied herein, and that no other agreement, statement or promise with respect
to the subject matter hereof not contained in this Agreement shall be valid or
binding.
IN WITNESS WHEREOF, the parties have executed or caused this Agreement to
be signed by their respective duly authorized officers on this the 18th Day of
February, 2000.
<PAGE> 98
BEACON LIGHT MINING COMPANY
[BEACON LIGHT IDAHO]
By:_/s/ Jerry Gruenbaum
----------------------------------
Jerry Gruenbaum, President
BEACON LIGHT HOLDING CORPORATION
Formerly known as:
BEACON LIGHT MINING COMPANY
[BEACON LIGHT NEVADA]
By:_/s/ Jerry Gruenbaum
----------------------------------
Jerry Gruenbaum, President
STATE OF CONNECTICUT:
: cc: Hartford
COUNTY OF HARTFORD :
On the 18th day of February, 2000, personally appeared before me a Notary
Public, Jerry Gruenbaum who acknowledged that he executed the above instrument.
/s/ Maria Varanda-Gonzalez
- ----------------------------
Notary Public
BEACON LIGHT MINIMG COMPANY
MEETING OF SHAREHOLDERS
At a special meeting of the stockholders of Beacon Light Mining Company
which was held at the law offices of Verdiramo & Verdiramo, P.A., 3163 Kennedy
Boulevard, Jersey City, New Jersey on February 16, 1998 at 9:00 a.m. eastern
standard time the following items were discussed and adopted:
1. Stockholder proxies representing 2,335,420 shares were represented at the
hearing thereby constituting a majority. The stockholders all approved the
three (3) items on the agenda which are as follows:
a. Approval of the change of domicile from Idaho to Nevada.
b. Approval of a new class of stock of preferred, convertible to $1.00 per
share of common stock, carrying a coupon of 8 percent.
c. Approval of the name change to Beacon Light Holding Corporation.
There being no further business before the special meeting, the meeting was
adjourned.
/s/Jerry Gruenbaum
- -------------------
JERRY GRUENBAUM. Director and Secretary
Exhibit A
99
EX-3.1(iv)
ARTICLES OF AMENDMENT
CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
BEACON LIGHT MINING COMPANY INC.
a Nevada Corporation
We the undersigned, as President and Secretary of BEACON LIGHT MINING
COMPANY INC., a Nevada corporation, do hereby certify:
That the Board of Directors of said corporation, at a meeting duly convened
and held on the 17 day of February, 1998 adopted a resolution to amend the
original Articles of Incorporation as follows:
The Fourth Article shall be amended to reflect that the total number of
voting common stock authorized that be issued by the corporation is FORTY-FIVE
MILLION (45,000,000) shares of stock with a par value of $0.001 per share, and
that the total number of preferred stock authorized that may be issued by the
corporation is FIVE MILLION (5,000,000) shares of stock with a par value of
$0.001 per share with an 8% coupon, convertible into common stock for a period
of 5 years at $1.00.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 2 ,800 000 that the said
change(s) and amendment has been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
/s/ Jerry Gruenbaum
- ------------------------------ -----------------------------------
President Secretary/President
STATE OF:
COUNTY OF:
On the 17 day of February, 1998, personally appeared before me a Notary Public,
JERRY GRUENBAUM, who acknowledged that they executed the above instrument.
- ----------------
/s/ Alfred A. Turo
-----------------------------------------
Commissioner of the Superior Court
100
EX-3.1(v)
ARTICLES OF AMENDMENT
CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
BEACON LIGHT MINING COMPANY INC.
a Nevada Corporation
We the undersigned, as President and Secretary of BEACON LIGHT MINING
COMPANY INC., a Nevada corporation, do hereby certify:
That the Board of Directors of said corporation, at a meeting duly convened
and held on the 17 day of February 1998 adopted a resolution to amend the
original Articles of Incorporation as follows:
The First Article shall be amended to change the name to Beacon Light
Holding Corporation.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 3 ,300 000 that the said
change(s) and amendment has been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
/s/ Jerry Gruenbaum
------------------------------ -----------------------------------
President Secretary/President
STATE OF:
COUNTY OF:
On the 17 day of February, 1998, personally appeared before me a Notary Public,
JERRY GRUENBAUM, who acknowledged that they executed the above instrument.
- ----------------
/s/ Margaret Fenlon
-----------------------------------------
Notary Public
101
EX-3.2
BY-LAWS
BYLAWS
OF
BEACON LIGHT HOLDING CORPORATION
ARTICLE 1
OFFICES
SECTION 1.1 PRINCIPAL OFFICE.
The initial principal office of the corporation in the State of New Jersey
shall be located at 100 Pearl Street - 14th Floor, Hartford, Connecticut. The
corporation may have such other offices, either within or outside of the State
of New Jersey as the Board of Directors may designate, or as the business of the
corporation may require from time to time.
SECTION 1.2 REGISTERED OFFICE.
The registered office of the corporation, required by the Nevada
Corporation Laws to be maintained in the State of Nevada, may be, but need not
be, identical with the principal office in the State of Nevada, and the address
of the registered office may be changed from time to time by the Board of
Directors.
ARTICLE 2
SHAREHOLDERS
SECTION 2.1 ANNUAL MEETING.
The annual meeting of the shareholders shall be held on a date and time to
be established by the Company's Board of Directors, commencing with the year
1998 for the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday in the State of Nevada, such meeting shall be
held on the next succeeding business day. If the election of directors shall
not be held on the day designated herein for any annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors shall cause
the election to be held at a special meeting of the shareholders as soon
thereafter as may be convenient. No business other than that stated in such
notice shall be transacted at such meeting without the unanimous consent of all
the shareholders thereat, in person or by proxy.
SECTION 2.2 SPECIAL MEETINGS.
Special meetings of the shareholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the President or by the Board
of Directors, and shall be called by the President at the request of the holders
of not less than one-tenth of all outstanding shares of the corporation entitled
to vote at the meeting.
<PAGE> 102
SECTION 2.3 PLACE OF MEETINGS.
The Board of Directors may designate any place, either within or outside of the
State of Nevada, as the place of meeting for any annual meeting or for any
special meeting called by the Board of Directors. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation in the State of New Jersey.
SECTION 2.4 NOTICE OF MEETING.
Written notice stating the place, day and hour of the meeting of
shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall, unless otherwise prescribed by statute, be
delivered not less than ten (10) nor more than fifty (50) days before the date
of the meeting, either personally or by mail, by or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting, to each shareholder of record entitled to vote at such meeting;
provided, however, that if the authorized shares of the corporation are to be
increased, at least thirty (30) days' notice shall be given, and if sale of all
or substantially all assets are to be voted upon, at least twenty (20) days'
notice shall be given. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the shareholder at his or
her address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
SECTION 2.5 MEETING OF ALL SHAREHOLDERS.
If all of the shareholders shall meet at any time and place, either within
or outside of the State of Nevada, and consent to the holding of a meeting at
such time and place, such meeting shall be valid without call or notice, and at
such meeting any corporate action may be taken.
SECTION 2.6 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or shareholders
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other purpose, the Board of Directors of the corporation
may provide that the share transfer books shall be closed for a stated period
but not to exceed, in any case, fifty (50) days. If the share transfer books
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for at
least ten (10) days immediately preceding such meeting. In lieu of closing the
share transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than fifty (50) days and, in case of a meeting of shareholders, not
less than ten (10) days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If the share
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section, such determination shall apply to any adjournment
thereof.
<PAGE> 103
SECTION 2.7 VOTING RECORD.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least ten (10) days before such meeting of
shareholders, a complete record of the shareholders entitled to vote at each
meeting of shareholders or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each. The record,
for a period of ten (10) days prior to such meeting, shall be kept on file at
the principal office of the corporation, whether within or outside of the State
of Nevada, and shall be subject to inspection by any shareholder for any purpose
germane to the meeting at any time during usual business hours. Such record
shall be produced and kept open at the time and place of the meeting and shall
be subject to the inspection of any shareholder during the whole time of the
meeting for the purpose thereof.
The original stock transfer books shall be the prima facie evidence as to
who are the shareholders entitled to examine the record or transfer books or to
vote at any meeting of shareholders.
SECTION 2.8 QUORUM.
A majority of the outstanding shares of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, except as otherwise provided by the Nevada Corporation Laws and
the Articles of Incorporation. In the absence of a quorum at any such meeting,
a majority of the shares so represented may adjourn the meeting from time to
time for a period not to exceed sixty days without further notice. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
during such meeting of that number of shareholders whose absence would cause
there to be less than a quorum.
SECTION 2.9 MANNER OF ACTING.
If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders, unless the vote of a greater proportion or number
or voting by classes is otherwise required by statute or by the Articles of
Incorporation or these bylaws.
SECTION 2.10 PROXIES.
At all meetings of shareholders, a shareholder may vote in person or by
proxy executed in writing by the shareholder or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
SECTION 2.11 VOTING OF SHARES.
Unless otherwise provided by these bylaws or the Articles of Incorporation,
each outstanding share entitled to vote shall be entitled to one vote upon each
matter submitted to vote at a meeting of shareholders, and each fractional share
shall be entitled to a corresponding fractional vote on each such matter.
<PAGE> 104
SECTION 2.12 VOTING OF SHARES BY CERTAIN SHAREHOLDERS.
Shares standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may prescribe, or, in
the absence of such provision, as the Board of Directors of such other
corporation may determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by an administrator, executor, court appointed
guardian or conservator, either in person or by proxy without a transfer of such
shares into the name of such administrator, executor, court appointed guardian
or conservator. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustees shall be entitled to vote shares
held by him or her without a transfer of such shares into his or her name.
Shares standing in the name of a receiver may be voted by such receiver and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into the trustee name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither shares of its own stock belonging to this corporation, nor shares
of its own stock held by it in fiduciary capacity, nor shares of its own stock
held by another corporation if the majority of shares entitled to vote for the
election of directors of such corporation is held by this corporation may be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time.
Redeemable shares which have been called for redemption shall not be
entitled to vote on any matter and shall not be deemed outstanding shares on and
after the date on which written notice of redemption has been mailed to
shareholders and a sum sufficient to redeem such shares has been deposited with
a bank or trust company with irrevocable instruction and authority to pay the
redemption price to the holders of the shares upon surrender of certificates
thereof.
SECTION 2.13 INFORMAL ACTION BY SHAREHOLDERS.
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
SECTION 2.14 VOTING BY BALLOT.
Voting on any question or in any election may be by voice vote unless the
presiding officer shall order or any shareholder shall demand that voting be by
ballot.
SECTION 2.15 CUMULATIVE VOTING.
Cumulative voting shall not be permitted in the election of officers or
directors, or in any other matter.
<PAGE> 105
SECTION 2.16 ORDER OF BUSINESS.
At the meetings of shareholders the following shall be the order of
business so far as is practicable:
1. Calling the roll
2. Reading, correcting, and approving of the minutes of the previous
meeting
3. Reports of officers
4. Reports of committees
5. Unfinished business
6. New business
7. Election of directors
8. Miscellaneous business
ARTICLE 3
BOARD OF DIRECTORS
SECTION 3.1 GENERAL POWERS.
The business and affairs of the corporation shall be managed by its Board
of Directors.
SECTION 3.2 PERFORMANCE OF DUTIES.
A director of the corporation shall perform his or her duties as a
director, including his or her duties as a member of any committee of the board
upon which he or she may serve, in good faith, in a manner he or she reasonably
believes to be in the best interests of the corporation, and with such care as
an ordinarily prudent person in a like position would use under similar
circumstances. In performing his or her duties, a director shall be entitled to
rely on information, opinions, reports, or statements, including financial
statements and other financial data, in each case prepared or presented by
persons and groups listed in paragraph (a), (b), and (c) of this Section 3.2;
but he or she shall not be considered to be acting in good faith if he or she
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A person who so performs his or her duties shall not have
any liability by reason of being or having been a director of the corporation.
Those persons and groups on whose information, opinions, reports, and statements
a director is entitled to rely upon are:
A. One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matter
presented;
B. Counsel, public accountants, or other persons as to matters which
the director reasonably believes to be within such persons' professional or
expert competence; or
C. A committee of the board upon which he or she does not serve, duly
designated in accordance with the provision of the Articles of Incorporation or
the bylaws, as to matters within its designated authority, which committee the
director reasonably believes to merit confidence.
<PAGE> 106
SECTION 3.3 NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall be fixed from time to time
by resolution of the Board of Directors, but in no instance shall there be less
than one director or that number otherwise required by law. Each director shall
hold office until the next annual meeting of shareholders or until his or her
successor shall have been elected and qualified. Directors need not be
residents of the State of Nevada or shareholders of the corporation.
When shares of the corporation shall become owned beneficially or of record
by one shareholder, the corporation shall elect at least one director. When the
shares of the corporation shall become owned beneficially or of record by two
shareholders, the corporation shall elect at least two directors. When the
shares of the corporation shall become owned beneficially or of record by three
or more shareholders, the corporation shall elect at least three directors.
There shall be a chairman of the board, who has been elected from among the
directors. He or she shall preside at all meetings of the stockholders and of
the Board of Directors. He or she shall have such other powers and duties as
may be prescribed by the Board of Directors.
SECTION 3.4 REGULAR MEETINGS.
A regular meeting of the Board of Directors shall be held without other
notice than this bylaw immediately after, and at the same place as, the annual
meeting of shareholders. The Board of Directors may provide, by resolution, the
time and place, either within or without the State of Nevada, for the holding of
additional regular meetings without other notice than such resolution.
SECTION 3.5 SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by or at the
request of the president or any two directors. The person or persons authorized
to call special meetings of the Board of Directors may fix any place, either
within or without the State of Nevada, as the place for holding any special
meeting of the Board of Directors called by them.
SECTION 3.6 NOTICE.
Written notice of any special meeting of directors shall be given as
follows:
By mail to each director at his or her business address at least ten (10)
days prior to the meeting; or
By personal delivery or telegram at least ten (10) days prior to the
meeting, to the business address of each director, or in the event such notice
is given on a Saturday, Sunday or holiday, to the residence address of each
director. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, so addressed, with postage thereon prepaid. If
notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegraph company. Any director may waive
notice of any meeting. The attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need to be specified in the notice or waiver of notice of
such meeting.
<PAGE> 107
SECTION 3.7 QUORUM.
A majority of the number of directors fixed by or pursuant to Section 3.2
of this Article 3 shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
SECTION 3.8 MANNER OF ACTING.
Except as otherwise required by law or by the Articles of Incorporation,
the act of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
SECTION 3.9 INFORMAL ACTION BY DIRECTORS.
Any action required or permitted to be taken by the Board of Directors or
by a committee thereof at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all of the
directors of the committee members entitled to vote with respect to the subject
matter thereof.
SECTION 3.10 PARTICIPATION BY ELECTRONIC MEANS.
Any members of the Board of Directors or any committee designated by such
board may participate in a meeting of the Board of Directors or committee by
means of telephone conference or similar communications equipment by which all
persons participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
SECTION 3.11 VACANCIES.
Any vacancy occurring in the Board of Directors may be affirmative vote of
a majority of the remaining directors. A director elected to fill a vacancy
shall be elected for the unexpired term of his or her predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the board of directors for a term of
office continuing only until the next election of the directors by the
shareholders.
SECTION 3.12 RESIGNATION.
Any director of the corporation may resign at any time by giving written
notice to the president or secretary of the corporation. The resignation of any
director shall take effect upon receipt of notice thereof or at such later time
as shall specified in such notice; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
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
resigned, shall have the power to fill such vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective.
SECTION 3.13 REMOVAL.
Any director or directors of the corporation may be removed at any time,
with or without cause, in the manner provided in the Delaware Corporation Code.
<PAGE> 108
SECTION 3.14 COMMITTEES.
By resolution adopted by a majority of the board of directors, the
directors may designate two or more directors to constitute a committee, any of
which shall have such authority in the management of the corporation as the
board of directors shall designate and shall be prescribed by the Nevada
Corporation code.
SECTION 3.15 COMPENSATION.
By resolution of the board of directors and irrespective of any personal
interest of any of the members, each director may be paid his or her expenses,
if any, of attendance at each meeting of the board of directors, and may be paid
a stated salary as director or a fixed sum for attendance at each meeting of the
board of directors or both. No such payment shall preclude any directors from
serving the corporation in any other capacity and receiving compensation
therefore.
SECTION 3.16 PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the board of
directors at which action on any Corporate matter is taken shall be presumed to
have assented to the action taken unless his or her dissent shall be entered in
the minutes of the meeting or unless he or she shall file his or her written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent not apply to a director who voted in favor of
such action.
ARTICLE 4
OFFICERS
SECTION 4.1 NUMBER.
The officers of the corporation shall be a president and secretary, each of
whom shall be elected by the board of directors. Such other officers and
assistant officers as my be deemed necessary may be elected or appointed by the
board of directors. Any two or more offices may be held by the same person,
except the offices of president and secretary.
SECTION 4.2 ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the board of directors
shall be elected annually by the board of directors at the fist meeting of the
board of directors held after the annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as practicable. Each officer shall hold office until
his or her successor shall have duly elected and shall have qualified or until
his or her death or until he or she resign or shall have been removed in the
manner hereinafter provided.
SECTION 4.3 REMOVAL.
Any officer or agent may be removed by the board of directors whenever in
its judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
<PAGE> 109
SECTION 4.4 VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the board of directors for the
unexpired portion of the term.
SECTION 4.5 PRESIDENT.
The president, subject to the control of the board of directors, shall in
general supervise and control all of the business and affairs of the
corporation. He or she shall, when present, and in the absence of a chairman of
the board, preside at all meetings of the shareholders and of the board of
directors. He or she may sign, with the secretary of any other proper officer
of the corporation thereunto authorized by the board of directors, certificates
for shares of the corporation and deeds, mortgages, bonds, contracts, or other
instruments which the board of directors has authorized to be executed, excepted
in cases where the signing and execution thereof shall be expressly delegated by
the board of directors or by these bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties as may be prescribed by the board of
directors from time to time.
SECTION 4.6 VICE PRESIDENT.
If elected or appointed by the board of directors, the vice president (or
in the event there be more than one vice president, the vice presidents in the
order designated at the time of election, or in the absence of any designation,
then in the order of election) shall, in the absence of the president or in the
event of his or her death, inability or refusal to act, perform all duties of
the president, and when so acting, shall have all powers of and be subject to
all the restrictions upon the president. Any vice president may sign, with the
treasurer or an assistant treasurer or the secretary or an assistant secretary,
certificates for shares of the corporation; and shall perform such other duties
as from time to time may be assigned to him or her by the president or by the
board of directors.
SECTION 4.7 SECRETARY.
The secretary shall: (a) keep the minutes of the proceedings of the
shareholders and of the board of directors in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by law; (c) be custodian of the
corporate records and of the seal of the corporation and see that the seal of
the corporation is affixed to all documents the execution of which on behalf of
the corporation under its seal is duly authorized; (d) keep a register of the
post office address of each shareholder which shall be furnished to the
secretary by such shareholder; (e) sign with the chairman or vice chairman of
the board of directors, or the president, or a vice president, certificates for
the shares of the corporation, the issuance of which shall have been authorized
by resolution of the board of directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general, perform all duties as
from time to time may be assigned to him or her by the president or by the board
of directors. The secretary shall be responsible that the corporation complies
with Section 78.105 of the Nevada Corporation Laws by supplying to the Nevada
resident agent or principal office in Nevada, any and all amendments or changes
to the by laws of the corporation. Also in compliance with Section 78.105 of
the same laws, he will also maintain and supply to the Nevada resident agent or
principal office in Nevada, a current statement setting forth the name of the
custodian of the stock ledger or duplicate stock ledger, and the present and
complete post office address, including street and number, if any, where such
stock ledger or duplicate stock ledger specified in the section is kept.
<PAGE> 110
SECTION 4.8 TREASURER.
The treasurer shall: (a) have charge and custody of and be responsible for
all funds and securities of the corporation; (b) receive and give receipts for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies or other depositories as shall be selected in accordance with the
provisions of article 5 of these bylaws; and (c) in general perform all of the
duties incident to the office of treasurer and such other duties as from time to
time may be assigned to him or her by the president or by the board of
directors.
SECTION 4.9 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
The assistant secretaries, when authorized by the board of directors, may
sign with the chairman or vice chairman of the board of directors or the
president or a vice president certificates for shares of the corporation the
issuance of which shall have been authorized by a resolution of the board of
directors. The assistant secretaries and assistant treasurers, in general,
shall perform such duties as shall be assigned to them by the secretary or the
treasurer, respectively, or by the president or the board of directors.
SECTION 4.10 BONDS.
If the board of directors by resolution shall so require, any officer or
agent of the corporation shall give bond to the corporation in such amount and
with such surety as the board of directors may deem sufficient, conditioned upon
the faithful performance of their respective duties and offices.
SECTION 4.11 SALARIES.
The salaries of the officers shall be fixed from time to time by the board
of directors and no officer shall be prevented from receiving such salary by
reason of the facts that he or she is also a director of the corporation.
ARTICLE 5
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 5.1 CONTRACTS
The board of directors may authorize any officer or officers, agent or
agents, to enter into contract or execute and deliver any instrument in the name
of and on behalf of the corporation, and such authority may be general or
confined to specific instances.
SECTION 5.2 LOANS
No loans shall be contracted on behalf of the corporation and no evidence
of indebtedness shall be issued in its name unless authorized by a resolution of
the board of directors. Such authority may be general or confined to specific
instances.
SECTION 5.3 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or as shall from time to time be determined by resolution of the
board of directors.
<PAGE> 111
SECTION 5.4 DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the board of directors may elect.
ARTICLE 6
SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES
SECTION 6.1 CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be respectively
numbered serially for each class of shares, or series thereof, as they are
issued, shall be impressed with the corporate seal or a facsimile thereof, and
shall be signed by the chairman or vice chairman of the board of directors or by
the president or a vice president and by the treasurer or an assistant treasurer
or by the secretary or an assistant secretary; provided that such signatures may
be facsimile if the certificate is countersigned by a transfer agent, or
registered by a registrar other than the corporation itself or its employee.
Each certificate shall state the name of the corporation, the fact that the
corporation is organized or incorporated under the laws of the state of Nevada,
the name of the person to whom issued, the date of issue, the class (or series
of any class), the number of shares represented thereby and the par value of the
shares represented thereby or a statement that such shares are without par
value. A statement of the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
class shall be set forth in full or summarized on the face or back of the
certificates which the corporation shall issue, or in lieu thereof, the
certificate may set forth that such a statement or summary will be furnished to
any shareholder upon request without charge. Each certificate shall be
otherwise in such form as may be prescribed by the board of directors and as
shall conform to the rules of any stock exchange on which the shares may be
listed.
The corporation shall not issue certificates representing fractional shares
and shall not be obligated to make any transfers creating a fractional interest
in a share of stock. The corporation may, but shall not be obligated, to issue
scrip in lieu of any fractional shares, such scrip to have terms and conditions
specified by the board of directors.
SECTION 6.3 CANCELLATION OF CERTIFICATES.
All certificates surrendered to the corporation for transfer shall be
canceled and no new certificates shall be issued in lieu thereof until the
former certificate for a like number of shares shall have been surrendered and
canceled, except as herein provided with respect to lost, stolen or destroyed
certificates.
SECTION 6.4 LOST, STOLEN OR DESTROYED CERTIFICATES.
Any shareholder claiming that his or her certificate for shares is lost,
stolen or destroyed may make an affidavit or affirmation of that fact and lodge
the same with the secretary of the corporation, accompanied by a signed
application for a new certificate. Thereupon, and upon the giving of a
satisfactory bond of indemnity to the corporation not exceeding an amount double
the value of the shares as represented by such certificate (the necessity for
such bond and the amount required to be determined by the president and
treasurer of the corporation), a new certificate may be issued of the same tenor
and representing the same number, class and series of shares as were represented
by the certificate alleged to be lost, stolen or destroyed.
<PAGE> 112
SECTION 6.5 TRANSFER OF SHARES.
Subject to the terms of any shareholder agreement relating to the transfer
of shares or other transfer registrations contained in the Articles of
Incorporation or authorized therein, shares of the corporation shall be
transferable on the books of the corporation by the holder thereof in person or
by his or her duly authorized attorney, upon surrender and cancellation of a
certificate or certificates for a like number of shares. Upon presentation and
surrender of a certificate for shares properly endorsed and payment of all taxes
therefore, the transferee shall be entitled to a new certificate or certificates
in lieu thereof. As against the corporation, a transfer of shares can be made
only on the books of the corporation and in the manner hereinabove provided, and
the corporation shall be entitled to treat the holder of record of any share as
the owner thereof and 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, save as expressly provided by
the statutes of the State of Nevada.
ARTICLE 7
FISCAL YEAR
The fiscal year of the corporation shall end on the last day of June in
each calendar year.
ARTICLE 8
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE 9
CORPORATE SEAL
The Board of Directors shall provide a corporate seal, which shall be
circular in form and shall have inscribed thereupon the name of the corporation
and the state of incorporation and the words "CORPORATE SEAL."
ARTICLE 10
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of these
bylaws or under the provisions of the Articles of Incorporation or under the
provisions of the Nevada Corporation Laws, or otherwise, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the event or other circumstance requiring such notice, shall be deemed
equivalent to the giving of such notice.
ARTICLE 11
AMENDMENTS
These bylaws may be altered, amended or repealed and new bylaws may be
adopted by a majority of the directors present at any meeting of the Board of
Directors of the corporation at which a quorum is present.
<PAGE> 113
ARTICLE 12
EMERGENCY BYLAWS
The emergency bylaws provided in this Article 12 shall be operative during
any emergency in the conduct of the business of the corporation resulting from
an attack on the United States or any nuclear or atomic disaster,
notwithstanding any different provision in the preceding articles of the bylaws
or in the Articles of Incorporation of the corporation or in the Nevada
Corporation Laws. To the extent not inconsistent with the provisions of this
Article, the bylaws provided in the preceding articles shall remain in effect
during such emergency and upon its termination the emergency bylaws shall cease
to be operative. During any such emergency:
A. A meeting of the Board of Directors may be called by any officer or
director of the corporation. Notice of the time and place of the meeting shall
be given by the person calling the meeting to such of the directors as it may be
feasible to reach by any available means of communication. Such notice shall be
given at such time in advance of the meeting as circumstances permit in the
judgment of the person calling the meeting.
B. At any such meeting of the Board of Directors, a quorum shall
consist of the number of directors in attendance at such meeting.
C. The board of directors, either before or during any such emergency,
may, effective in the emergency, change the principal office or designate
several alternative principal offices or regional offices, or authorize the
officers so to do.
D. The board of directors, either before or during any such emergency,
may provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the corporation shall
for any reason be rendered incapable of discharging their duties.
E. No officer, director or employee acting in accordance with these
emergency bylaws shall be liable except for willful misconduct.
F. These emergency bylaws shall be subject to repeal or change by
further action of the board of directors or by action of the shareholders, but
no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action taken prior to the time of such repeal or
change. Any amendment of these emergency bylaws may make any further or
different provision that may be practical and necessary for the circumstances of
the emergency.
CERTIFICATE
I hereby certify that the foregoing bylaws, consisting of 16 pages,
including this page, constitute the bylaws of BEACON LIGHT HOLDING CORPORATION,
adopted by the board of directors of the corporation as of October 1, 1998.
/s/Jerry Gruenbaum
----------------------------
Jerry Gruenbaum, Secretary
114
EX-3.2(i)
AMENDMENT TO BY-LAWS
AMENDMENT TO BYLAWS
OF
BEACON LIGHT HOLDING CORPORATION
ARTICLE 1
OFFICES
SECTION 1.1 PRINCIPAL OFFICE.
The principal office of the corporation in the State of Connecticut shall
be located at 100 Pearl Street - 14th Floor, Hartford, Connecticut. The
corporation may have such other offices, either within or outside of the State
of New Jersey as the Board of Directors may designate, or as the business of the
corporation may require from time to time.
SECTION 1.2 REGISTERED OFFICE.
The registered office of the corporation, required by the Nevada
Corporation Laws to be maintained in the State of Nevada, shall be with the
Resident Agent at Corporate Service Center, Inc. 1475 Terminal Way, Suite E,
Reno, Nevada, and the address of the registered office may be changed from time
to time by the Board of Directors.
ARTICLE 4
OFFICERS
SECTION 4.1 NUMBER.
The officers of the corporation shall be a president and secretary, each of
whom shall be elected by the board of directors. Such other officers and
assistant officers as my be deemed necessary may be elected or appointed by the
board of directors. Any two or more offices may be held by the same person.
CERTIFICATE
I hereby certify that the foregoing is the only amendment to the bylaws of
Beacon Light Holding Corporation dated October 1, 1998, consisting of this one
page, has been adopted by the board of directors of the corporation on November
2, 1999.
/s/ Jerry Gruenbaum
-----------------------
Jerry Gruenbaum, Secretary
115
EX-4.1
FORM OF COMMON STOCK CERTIFICATE
1. Number of certificate
2. Number of shares represented by certificate
3. Title of stock and CUSIP number
4. Name of stockholder
5. Date of issuance
6. Corporate seal
7. Signature of president and secretary of corporation at time of issuance.
116
EX-4.1(i)
CERTIFICATE OF DESIGNATION
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK
OF
BEACON LIGHT HOLDINGS CORPORATION
Beacon Light Holding Corporation (the "Company"), a corporation organized
and existing under the General Corporation Law of the State of Nevada, does
hereby certify that, pursuant to authority conferred upon the Board of Directors
of the Company by the Articles of Incorporation, as amended, of the Company, and
pursuant to Section 78.1955 of the Nevada General Corporation Law, the Board of
Directors of the Company at a telephonic meeting duly held, adopted resolutions
(i) authorizing a series of the Company's preferred stock, par value $0.001 per
share, and (ii) providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of Five Million (5,000,000) shares of Series B Convertible
Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 5,000,000 shares of
Series B Convertible Preferred Stock (the "Preferred Shares"), par value $0.001
per share, which shall have the following powers, designations, preferences and
other special rights:
1) Dividends. The Preferred Shares shall bear dividends ("Dividends")
at a rate of 8.5% of the Stated Value (as defined below) per annum, which shall
be cumulative and accrue daily from the Issuance Date (as defined below).
Dividends shall be payable in cash on the Redemption Date or at any other date
on which Buyer has a redemption right ("Dividend Date"). If a Dividend Date is
not a Business Day (as defined below), then the Dividend shall be due and
payable on the Business Day immediately following the Dividend Date. Any accrued
and unpaid dividends which are not paid within five (5) Business Days of such
Dividend Date shall bear interest at the rate of 1.5 % per month (pro rated for
partial months) from such Dividend Date until the same is paid (the "Default
Interest").
2) Conversion of Preferred Shares. Preferred Shares shall be
convertible into shares of the Companys common stock, par value $0.001 per share
(the "Common Stock"), on the terms and conditions set forth in this Section 2.
(a) Certain Defined Terms. For purposes of this Certificate of
Designations, the following terms shall have the following meanings:
(i) "Closing Bid Price" means, for any security as of any date, the
last closing bid price for such security on the Principal Market (as defined
below) as reported by Bloomberg Financial Markets ("Bloomberg"), or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last c1osin~ bid
price of such security in the over-the-counter market on the electronic bulletin
<PAGE> 117
board for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price of such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of Preferred Shares. (All such determinations to
be appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period).
(ii) "Closing Sale Price" means, for any security as of any date, the
last closing trade price for such security on the Principal Market (as defined
below) as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
closing trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing trade price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the last closing ask price of such
security as reported by Bloomberg, or, if no last closing ask price is reported
for such security by Bloomberg, the average of the ask prices of any market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Sale Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Sale Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of Preferred Shares. (All such determinations to
be appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period).
(iii) "Issuance Date" means, with respect to each Preferred Share, the date
of issuance of the applicable Preferred Share.
(iv) "Market Price" means, with respect to any security for any date of
determination, that price which shall be computed as the arithmetic average of
the Closing Bid Prices for such security on each of the 20 consecutive trading
days immediately preceding such date of determination. (All such determinations
to be appropriately adjusted for any stock dividend, stock split or other
similar transaction during the pricing period).
(v) "Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in the city of New York are authorized or required
by law to remain closed.
(vi) "Conversion Ratio" means at any determination date, the number of
Common Stock issuable in exchange for each Preferred Share. On the Issuance
Date, the Conversion Ratio shall be 1.0.
(vii) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(viii) "Purchase Price" means $115,000, the aggregate amount paid for the
Preferred Shares.
(ix) "Redemption Date" shall be November 17, 2001.
<PAGE> 118
(x) "Redemption Price" means the aggregate price paid for the Preferred
Shares which yields the Total Return.
(xi) "Principal Market" means the Nasdaq National Market.
(xii) "Registration Rights Agreement" means that certain registration
rights agreement between the Company and the initial holders of the Preferred
Shares relating to the filing of a registration statement covering the resale of
the shares of Common Stock issuable upon conversion of the Preferred Shares.
(xiii)"Securities Purchase Agreement" means that certain securities
purchase agreement between the Company and the initial holders of the Preferred
Shares.
(xiv) "Stated Value" means $0.15 (unless otherwise stated, references
herein to "Dollar" or "$" shall mean United States Dollars).
(xv) "Total Return" shall be determined according to the following
formula:
PP + UD - PD - SP - CS + FE + BF + CC
PP = Purchase Price
UD = Accrued and unpaid dividends
PD = Previously paid dividends
SP = Proceeds from the sale of the Preferred Shares or Common Stock
CS = Unsold Common Stock (determined as the five day average of the
Closing Sale Price of the Common Stock of the Company as of the Redemption Date)
FE = Fees and expenses incurred by Buyer
BF = Broker fees incurred by Buyer
CC = Costs incurred by Buyer in connection with enforcing its rights
under the Certificate of Designations
(b) Holder's Conversion Right. At any time or times on or after the
Issuance Date, any holder of Preferred Shares shall be entitled to convert any
whole number of Preferred Shares into an equal number of fully paid and
nonassessable shares of Common Stock in accordance with Section 2(c).
(c) Mechanics of Conversion. The conversion of Preferred Shares shall
be conducted in the following manner:
(i) Holder's Delivery Requirements. To convert Preferred Shares into
shares of Common Stock on any date (the "Conversion Date"), the holder thereof
shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior
1o 11:59 p.m., Central Time on such date, a copy of a fully executed notice of
conversion in the form attached hereto as Exhibit I (the "Conversion Notice") to
the Company with a copy thereof to the Company's designated transfer agent (the
"Transfer Agent") and (B) if required by Section 2(c)(v), surrender to a common
carrier for delivery to the Transfer Agent as soon as practicable following such
date the original certificates representing the Preferred Shares being converted
(or an indemnification undertaking with respect to such shares in the case of
their loss, theft or destruction) (the "Preferred Stock Certificates").
<PAGE> 119
(ii) Company's Response. Upon receipt by the Company of a copy of a
Conversion Notice, the Company (1) shall immediately send, via facsimile, a
confirmation of receipt of such Conversion Notice to such holder and the
Transfer Agent, which confirmation shall constitute an instruction to the
Transfer Agent to process such Conversion Notice in accordance with the terms
herein and (2) on or before the second Business Day following the date of
receipt (or the third Business Day following the date of receipt if received
after 11:00 a.m. local time of the Company) (the "Share Delivery Date"), (A)
issue and deliver to the address as specified in the Conversion Notice, a
certificate, registered in the name of the holder or its designee, for the
number of shares of Common Stock to which the holder shall be entitled, or (B)
provided the Transfer Agent is participating in The Depository Trust Company
("DTC") Fast Automated Securities Transfer Program, upon the request of the
holder, credit such aggregate number of shares of Common Stock to which the
holder shall be entitled to the holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system. If the number of
Preferred Shares represented by the Preferred Stock Certificate(s) submitted for
conversion is greater than the number of Preferred Shares being converted, then
the Transfer Agent shall, as soon as practicable and in no event later than
three Business Days after receipt of the Preferred Stock Certificate(s) (the
"Preferred Stock Delivery Date") and at its own expense, issue and deliver to
the holder a new Preferred Stock Certificate representing the number of
Preferred Shares not converted.
(iii) Record Holder. The person or persons entitled to receive the
shares of Common Stock issuable upon a conversion of Preferred Shares shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
(iv) Company's Failure to Timely Convert.
(A) Cash Damages. If within three (3) Business Days after the Company's
receipt of the facsimile copy of a Conversion Notice the Company shall fail to
issue a certificate to a holder or credit such holder's balance account with DTC
for the number of shares of Common Stock to which such holder is entitled upon
such holder's conversion of Preferred Shares or to issue a new Preferred Stock
Certificate representing the number of Preferred Shares to which such holder is
entitled pursuant to Section 2(c)(ii), in addition to all other available
remedies which such holder may pursue hereunder and under the Securities
Purchase Agreement (including indemnification pursuant to Section 8 thereof),
the Company shall pay additional damages to such holder for each date after the
Share Delivery Date such conversion is not timely effected and/or each date
after the Preferred Stock Delivery Date such Preferred Stock Certificate is not
delivered in an amount equal to 3.0% of the product of (I) the sum of the number
of shares of Common Stock not issued to the holder on or prior to the Share
Delivery Date and to which such holder is entitled and, in the event the Company
has failed to deliver a Preferred Stock Certificate to the holder on or prior to
the Preferred Stock Delivery Date, the number of shares of Common Stock issuable
upon conversion of the Preferred Shares represented by such Preferred Stock
Certificate, as of the Preferred Stock Delivery Date and (II) the Closing Sale
Price of the Common Stock on the Share Delivery Date, in the case of the failure
to deliver Common Stock, or the Preferred Stock Delivery Date, in the case of
failure to deliver a Preferred Stock Certificate.
<PAGE> 120
(B) Redemption. If for any reason a holder has not received all of the
shares of Common Stock prior to the tenth (10th) Business Day after the Share
Delivery Date with respect to a conversion of Preferred Shares (a "Conversion
Failure"), then the holder, upon written notice to the Company, may require that
the Company redeem all Preferred Shares held by such holder, including the
Preferred Shares previously submitted for conversion and with respect to which
the Company has not delivered shares of Common Stock, in accordance with Section
3.
(v) Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of Preferred Shares in accordance with the terms hereof,
the holder thereof shall not be required to physically surrender the certificate
representing the Preferred Shares to the Company unless the full number of
Preferred Shares represented by the certificate are being converted. The holder
and the Company shall maintain records showing the number of Preferred Shares so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the holder and the Company, so as not to require
physical surrender of the certificate representing the Preferred Shares upon
each such conversion. In the event of any dispute or discrepancy, such records
of the Company shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if Preferred Shares represented by a
certificate are converted as aforesaid, the holder may not transfer the
certificate representing the Preferred Shares unless the holder first physically
surrenders the certificate representing the Preferred Shares to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
holder a new certificate of like tenor, registered as the holder may request,
representing in the aggregate the remaining number of Preferred Shares
represented by such certificate. The holder and any assignee, by acceptance of a
certificate, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of any Preferred Shares, the number of Preferred
Shares represented by such certificate may be less than the number of Preferred
Shares stated of the face thereof. Each certificate for Preferred Shares shall
bear the following legend:
ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE
COMPANY'S CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE PREFERRED
SHARES REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 2(c)(v) THEREOF. THE
NUMBER OF PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE
NUMBER OF PREFERRED SHARES STATED ON THE FACE HEREOF PURSUANT TO SECTION 2(c)(v)
OF THE CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS.
(d) Taxes. The Company shall pay any and all taxes that may be payable
with respect to the issuance and delivery of Common Stock, including, but not
limited to, any transfer taxes, upon the conversion of Preferred Shares;
provided, however, the Company shall not be liable for any taxes incurred by the
holder of the Preferred Shares as a result of reporting such Preferred Shares
for income tax purposes.
(e) Adjustments to Conversion Ratio. The Conversion Ratio will be
subject to adjustment from time to time as provided in this Section 2(e).
<PAGE> 121
(i) Adjustment of the Conversion Ratio upon Subdivision or Combination
of Common Stock. If the Company at any time subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Ratio in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Ratio in effect
immediately prior to such combination will be proportionately increased.
(ii) Adjustment of the Conversion Ratio Upon Major Corporate Event
Announcement. In the event (A) the Company makes a public announcement that it
intends to consolidate or merge with or into another Person or engage in a
business combination involving the issuance or exchange of more than 30% of the
Company's outstanding Common Stock, (B) the Company makes a public announcement
that it intends to sell or transfer all or substantially all of the Company's
assets, or (C) any Person (including the Company) publicly announces a purchase,
tender or exchange offer for more than 30% of the Company's outstanding Common
Stock (the transactions described in clauses (A), (B) and (C) above are
hereinafter referred to as "Major Corporate Events" and the date of the
announcement referred to in clause (A), (B) or (C) is hereinafter referred to as
the "Announcement Date"), then the Conversion Ratio shall, effective upon the
Announcement Date and continuing through and including the Adjusted Conversion
Ratio Termination Date (as defined below), be equal to the Conversion Ratio
which would have been applicable for a conversion by the holder on the
Announcement Date. From and after the Adjusted Conversion Ratio Termination
Date, the Conversion Ratio shall be determined as set forth in Section 3(a). For
purposes hereof, 'Adjusted Conversion Ratio Termination Date" shall mean, with
respect to any proposed Major Corporate Event for which a public announcement as
contemplated by this Section 2(e)(ii) has been made, the date upon which the
Company or other Person (in the case of clause (C) above) consummates or
publicly announces the termination or abandonment of the proposed Major
Corporate Event which was the subject of the previous public announcement.
(iii) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2(e) but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the
Conversion Ratio so as to protect the rights of the holders of the Preferred
Shares; provided that no such adjustment will decrease the Conversion Ratio as
otherwise determined pursuant to this Section 2(e).
(iv) Notices.
(A) Immediately upon any adjustment of the Conversion Ratio, the
Company will give written notice thereof to each holder of Preferred Shares,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment.
<PAGE> 122
(B) The Company will give written notice to each holder of Preferred
Shares at least twenty (20) days prior to the date on which the Company closes
its books or takes a record (I) with respect to any dividend or distribution
upon the Common Stock, (II) with respect to any pro rata subscription offer to
holders of Common Stock or (III) for determining rights to vote with respect to
any Organic Change (as defined below), dissolution or liquidation, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.
(C) The Company will also give written notice to each holder of
Preferred Shares at least twenty (20) days prior to the date on which any
Organic Change (as defined below), dissolution or liquidation will take place,
provided that such information shall be made known to the public prior to or in
conjunction with such notice being provided to such holder.
(3) Redemption at Option of Holders.
(a) Holder's Redemption Right. If any Preferred Shares remain
outstanding on the Redemption Date, then the holder of such Preferred Shares
shall be entitled to require the Company to redeem all of such Preferred Shares
at the Redemption Price.
(b) Termination of Redemption Right. In the event the aggregate
proceeds received from Buyer's sale of any combination of Preferred Shares and
Common Stock exceeds the Total Return, the right of redemption set forth in
Section 3(a) shall terminate.
(c) Redemption Option Upon Triggering Event. In addition to all other
rights of the holders of Preferred Shares contained herein, after a Triggering
Event (as defined below), each holder of Preferred Shares shall have the right,
at such holder's option, to require the Company to redeem all or a portion of
such holder's Preferred Shares at the Redemption Price.
(d) "Triggering Event". A "Triggering Event" shall be deemed to have
occurred at such time as any of the following events:
(i) the failure of the Registration Statement to be declared effective
by the SEC on or prior to the date that is 30 days after the Scheduled Effective
Date;
(ii) while the Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the
holder of the Preferred Shares for sale of all of the Registrable Securities (as
defined in the Registration Rights Agreement) in accordance with the terms of
the Registration Rights Agreement, and such lapse or unavailability continues
for a period of five consecutive trading days, provided that the cause of such
lapse or unavailability is not due to factors solely within the control of such
holder of Preferred Shares;
(iii) the Company's or the Transfer Agent's notice to any holder of
Preferred Shares, including by way of public announcement, at any time, of its
intention not to comply with a request for conversion of any Preferred Shares
into shares of Common Stock that is tendered in accordance with the provisions
of this Certificate of Designations;
(iv) a Conversion Failure (as defined in Section 2(d)(iv)(B);
<PAGE> 123
(v) upon the Company's receipt of a Conversion Notice, the Company
shall not be obligated to issue the Common Stock due to the provisions of
Section 13; or
(vi) the Company breaches any representation, warranty, covenant or
other term or condition of the Securities Purchase Agreement, the Registration
Rights Agreement, this Certificate of Designations or any other agreement,
document, certificate or other instrument delivered in connection with the
transactions contemplated thereby and hereby, except to the extent that such
breach would not have a Material Adverse Effect (as defined in Section 3(a) of
the Securities Purchase Agreement) and except, in the case of a breach of a
covenant which is curable, only if such breach continues for a period of at
least 10 days.
(e) Mechanics of Redemption at Option of Buyer. Within one (1) day
after the occurrence of a Triggering Event, the Company shall deliver written
notice thereof via facsimile and overnight courier ("Notice of Triggering
Event") to each holder of Preferred Shares. At any time after the earlier of a
holder's receipt of a Notice of Triggering Event and such holder becoming aware
of a Triggering Event, any holder of Preferred Shares then outstanding may
require the Company to redeem all of the Preferred Shares by delivering written
notice thereof via facsimile and overnight courier ("Notice of Redemption at
Option of Buyer") to the Company, which Notice of Redemption at Option of Buyer
shall indicate (i) the number of Preferred Shares that such holder is electing
to redeem and (ii) the applicable Redemption Price, as calculated pursuant to
Section 3(a) above.
(f) Payment of Redemption Price. Upon the Company's receipt of a
Notice(s) of Redemption at Option of Buyer from any holder of Preferred Shares,
the Company shall immediately notify each holder of Preferred Shares by
facsimile of the Company's receipt of such notices and each holder which has
sent such a notice shall promptly submit to the Transfer Agent such holder's
Preferred Stock Certificates which such holder has elected to have redeemed. The
Company shall deliver the applicable Redemption Price to such holder within five
Business Days after the Company's receipt of a Notice of Redemption at Option of
Buyer; provided that a holder's Preferred Stock Certificates shall have been so
delivered to the Transfer Agent. If the Company is unable to redeem all of the
Preferred Shares submitted for redemption, the Company shall (i) redeem a pro
rata amount from each holder of Preferred Shares based on the number of
Preferred Shares submitted for redemption by such holder relative to the total
number of Preferred Shares submitted for redemption by all holders of Preferred
Shares and (ii) in addition to any remedy such holder of Preferred Shares may
have under this Certificate of Designations and the Securities Purchase
Agreement, pay to each holder interest at the rate of 1.5% per month (prorated
for partial months) in respect of each unredeemed Preferred Share until paid in
full.
(4) Other Rights of Holders.
(a) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person or
other transaction which is effected in such a way that holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any (i) sale of all
or substantially all of the Company's assets to an acquiring Person or (ii)
other Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
<PAGE> 124
resulting from such Organic Change (in each case, the "Acquiring Entity") a
written agreement (in form and substance satisfactory to the holders of a
majority of the Preferred Shares then outstanding) to deliver to each holder of
Preferred Shares in exchange for such shares, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance to
the Preferred Shares, including, without limitation, having a stated value and
liquidation preference equal to the Stated Value and the Liquidation Preference
of the Preferred Shares held by such holder, and satisfactory to the holders of
a majority of the Preferred Shares then outstanding. Prior to the consummation
of any other Organic Change, the Company shall make appropriate provision (in
form and substance satisfactory to the holders of a majority of the Preferred
Shares then outstanding) to insure that each of the holders of the Preferred
Shares will thereafter have the right to acquire and receive in lieu of or in
addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Preferred Shares such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for the
number of shares of Common Stock which would have been acquirable and receivable
upon the conversion of such holder's Preferred Shares as of the date of such
Organic Change (without taking into account any limitations or restrictions on
the convertibility of the Preferred Shares).
(b) Optional Redemption Upon Change of Control. In addition to the
rights of the holders of Preferred Shares under Section 4(a), upon a Change of
Control (as defined below) of the Company each holder of Preferred Shares shall
have the right, at such holder's option, to require the Company to redeem all or
a portion of such holder's Preferred Shares at a price per Preferred Share equal
to the Redemption Price. No sooner than 15 days nor later than 10 days prior to
the consummation of a Change of Control, but not prior to the public
announcement of such Change of Control, the Company shall deliver written notice
thereof via facsimile and overnight courier (a "Notice of Change of Control") to
each holder of Preferred Shares. At any time during the period beginning after
receipt of a Notice of Change of Control (or, in the event a Notice of Change of
Control is not delivered at least 10 days prior to a Change of Control, at any
time on or after the date which is 10 days prior to a Change of Control) and
ending on the date of such Change of Control, any holder of the Preferred Shares
then outstanding may require the Company to redeem all or a portion of the
holder's Preferred Shares then outstanding by delivering written notice thereof
via facsimile and overnight courier (a "Notice of Redemption Upon Change of
Control") to the Company, which Notice of Redemption Upon Change of Control
shall indicate the number of Preferred Shares that such holder is submitting for
redemption. Upon the Company's receipt of a Notice(s) of Redemption Upon Change
of Control from any holder of Preferred Shares, the Company shall promptly, but
in no event later than one (1) Business Day following such receipt, notify each
holder of Preferred Shares by facsimile of the Company's receipt of such
Notice(s) of Redemption Upon Change of Control. The Company shall deliver the
Redemption Price simultaneous with the consummation of the Change of Control;
provided that, if required by Section 2(c)(v), a holder's Preferred Stock
Certificates shall have been so delivered to the Company. Payments provided for
in this Section 4(b) shall have priority to payments to other stockholders in
connection with a Change of Control. For purposes of this Section 4(b), "Change
of Control" means (i) the consolidation, merger or other business combination of
the Company with or into another Person (other than (A) a consolidation, merger
or other business combination in which holders of the Company's voting power
immediately prior to the transaction continue after the transaction to hold,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, or (B)
<PAGE> 125
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company), (ii) the sale or transfer of all
or substantially all of the Company's assets, or (iii) a purchase, tender or
exchange offer made to and accepted by the holders of more than the 50% of the
outstanding shares of Common Stock.
(c) Purchase Rights. If at any time the Company grants, issues or sells
any options, convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the holders of Preferred Shares will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon complete
conversion of the Preferred Shares (without taking into account any limitations
or restrictions on the convertibility of the Preferred Shares) immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.
(5) Reservation of Shares: Authorized Shares.
(a) Reservation. The Company shall, so long as any of the Preferred
Shares are outstanding, take all action necessary to reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all of the Preferred Shares then outstanding (the "Required Reserve Amount).
(b) Insufficient Authorized Shares. If at any time while any of the
Preferred Shares remain outstanding the Company does not have a sufficient
number of authorized and unreserved shares of Common Stock to satisfy its
obligation to reserve for issuance upon conversion of the Preferred Shares at
least a number of shares of Common Stock equal to the Required Reserve Amount
(an "Authorized Share Failure"), then the Company shall immediately take all
action necessary to increase the Company's authorized shares of Common Stock to
an amount sufficient to allow the Company to reserve the Required Reserve Amount
for the Preferred Shares then outstanding. Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, but in no event later than 60 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the authorization of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its best
efforts to solicit its stockholders' approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.
(6) Voting Rights. Holders of Preferred Shares shall have no voting
rights, except as required by law, including but not limited to the Nevada
General Corporation Law, and as expressly provided in this Certificate of
Designations.
(7) Liquidation, Dissolution, Winding-Up. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Company, the
holders of the Preferred Shares shall be entitled to receive in cash out of the
assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "Liquidation Funds"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
<PAGE> 126
class junior in rank to the Preferred Shares in respect of the preferences as to
the distributions and payments on the liquidation, dissolution and winding up of
the Company, an amount per Preferred Share equal to the amount of the Stated
Value (such amount being referred to as the "Liquidation Preference"); provided
that, if the Liquidation Funds are insufficient to pay the full amount due to
the holders of Preferred Shares and holders of shares of other classes or series
of preferred stock of the Company that are of equal rank with the Preferred
Shares as to payments of Liquidation Funds (the 'Pari Passu Shares"), then each
holder of Preferred Shares and Pari Passu Shares shall receive a percentage of
the Liquidation Funds equal to the full amount of Liquidation Funds payable to
such holder as a liquidation preference, in accordance with their respective
Certificate of Designations, Preferences and Rights, as a percentage of the full
amount of Liquidation Funds payable to all holders of Preferred Shares and Pari
Passu Shares. In addition to the receipt of the Liquidation Preference, in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company, the holders of the Preferred Shares shall be entitled to receive
Liquidation Funds distributed to holders of Common Stock, after the Liquidation
Preference has been paid, to the same extent as if such holders of Preferred
Shares had converted the Preferred Shares into Common Stock (without regard to
any limitations on conversions herein or elsewhere) and had held such shares of
Common Stock on the record date for such distribution of the remaining
Liquidation Funds. The purchase or redemption by the Company of stock of any
class, in any manner permitted by law, shall not, for the purposes hereof, be
regarded as a liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other Person, nor the
sale or transfer by the Company of less than substantially all of its assets,
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Company. No holder of Preferred Shares shall be entitled to
receive any amounts with respect thereto upon any liquidation, dissolution or
winding up of the Company other than the amounts provided for herein; provided
that a holder of Preferred Shares shall be entitled to all amounts previously
accrued with respect to amounts owed hereunder.
(8) Preferred Rank. All shares of Common Stock shall be of junior rank
to all Preferred Shares in respect to the preferences as to distributions and
payments upon the liquidation, dissolution and winding up of the Company. The
rights of the shares of Common Stock shall be subject to the preferences and
relative rights of the Preferred Shares. Without the prior express written
consent of the holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares, the Company shall not hereafter authorize or issue additional
or other capital stock that is of senior or equal rank to the Preferred Shares
in respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company. Without the prior
express written consent of the holders of not less than two-thirds (2/3) of the
then outstanding Preferred Shares, the Company shall not hereafter authorize or
make any amendment to the Company's Articles of Incorporation or bylaws, or file
any resolution of the board of directors of the Company with the Nevada
Secretary of State or enter into any agreement containing any provisions, which
would adversely affect or otherwise impair the rights or relative priority of
the holders of the Preferred Shares relative to the holders of the Common Stock
or the holders of any other class of capital stock. In the event of the merger
or consolidation of the Company with or into another corporation, the Preferred
Shares shall maintain their relative powers, designations and preferences
provided for herein and no merger shall result inconsistent therewith.
<PAGE> 127
(9) Participation. Subject to the rights of the holders, if any, of the
Pari Passu Shares, the holders of the Preferred Shares shall, as holders of
Preferred Stock, be entitled to such dividends paid and distributions made to
the holders of Common Stock to the same extent as if such holders of Preferred
Shares had converted the Preferred Shares into Common Stock (without regard to
any limitations on conversion herein or elsewhere) and had held such shares of
Common Stock on the record date for such dividends and distributions. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
(10) Restriction on Redemption and Cash Dividends. Until all of the
Preferred Shares have been converted or redeemed as provided herein, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash dividend
or distribution on, its Common Stock without the prior express written consent
of the holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares.
(11) Vote to Change the Terms of Preferred Shares. The affirmative vote
at a meeting duly called for such purpose or the written consent without a
meeting, of the holders of not less than two-thirds (2/3) of the then
outstanding Preferred Shares, shall be required for any change to this
Certificate of Designations or the Company's Articles of Incorporation which
would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Preferred Shares.
(12) Lost or Stolen Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the holder
contemporaneously requests the Company to convert such Preferred Shares into
Common Stock.
(13) Remedies. Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Certificate of Designations
shall be cumulative and in addition to all other remedies available under this
Certificate of Designations, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pur~sue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designations. The Company covenants to each holder of Preferred Shares that
there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holders of the
Preferred Shares and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach
or threatened breach, the holders of the Preferred Shares shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.
<PAGE> 128
(14) Specific Shall Not Limit General: Construction. No specific
provision contained in this Certificate of Designations shall limit or modify
any more general provision contained herein. This Certificate of Designations
shall be deemed to be jointly drafted by the Company and all Buyers and shall
not be construed against any person as the drafter hereof.
(15) Failure or Indulgence Not Waiver. No failure or delay on the part
of a holder of Preferred Shares in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by Jerry Gruenbaum, its President, as of the 12th day of November,
1999.
BEACON LIGHT HOLDING
CORPORATION, a Nevada corporation
By: /s/Jerry Gruenbaum
-----------------------
Name: Jerry Gruenbaum
Its: President and Secretary
129
EX-10.1
2000 STOCK OPTION PLAN
BEACON LIGHT HOLDING CORPORATION
1999 STOCK OPTION PLAN
1. GRANT OF OPTIONS GENERALLY.
In accordance with the provisions hereinafter set forth in this stock
option plan, the name of which is the BEACON LIGHT HOLDING CORPORATION 1999
STOCK OPTION PLAN (the "Plan") , the Board of Directors (the "Board") or, the
Compensation Committee (the "Stock Option Committee") of BEACON LIGHT HOLDING
CORPORATION (the "Corporation") is hereby authorized to issue from time to time
on the Corporation's behalf to any one or more Eligible Persons, as hereinafter
defined, options to acquire shares of the Corporation's $.001 par value common
stock (the "Stock")
2. TYPE OF OPTIONS.
The Board or the Stock Option Committee is authorized to issue options,
which meet the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), which options are hereinafter referred to collectively
as ISOs, or singularly as an ISO. The Board or the Stock Option Committee is
also, in its discretion, authorized to issue options, which are not ISOs, which
options are hereinafter referred to collectively as NSOs, or singularly as an
NSO. The Board or the Stock Option Committee is also authorized, but not
obligated, to issue "Reload Options" in accordance with Paragraph 8 herein,
which options are hereinafter referred to collectively as Reload Options, or
singularly as a Reload Option. Except where the context indicates to the
contrary, the term "Option" or "Options" means ISOs, NSOs and Reload Options.
3. AMOUNT OF STOCK.
The aggregate number of shares of Stock which may be purchased pursuant to
the exercise of Options shall be 3,000,000 shares. Of this amount, the Board or
the Stock Option Committee shall have the power and authority to designate
whether any Options so issued shall be ISOs or NSOs, subject to the restrictions
on ISOs contained elsewhere herein. If an Option ceases to be exercisable, in
whole or in part, the shares of Stock underlying such Option shall continue to
be available under this Plan. Further, if shares of Stock are delivered to the
Corporation as payment for shares of Stock purchased by the exercise of an
Options granted under this Plan, such shares of Stock shall also be available
under this Plan. If there is any change in the number of shares of Stock on
account of the declaration of stock dividends, recapitalization resulting in
stock split-ups, or combinations or exchanges of shares of Stock, or otherwise,
the number of shares of Stock available for purchase upon the exercise of
Options, the shares of Stock subject to any Option and the exercise price of any
outstanding Option shall be appropriately adjusted by the Board or the-Stock
Option Committee. The Board or the Stock Option Committee shall give notice of
any adjustments to each Eligible Person granted an Option under this Plan, and
such adjustments shall be effective and binding on all Eligible Persons. If
because of one or more recapitalizations, reorganizations or other corporate
events, the holders of outstanding Stock receive something other than shares of
Stock, then, upon exercise of an Option, the Eligible Person will receive what
<PAGE> 130
the holder would have owned if the holder had exercised the Option immediately
before the first such corporate event and disposed of anything the holder
received as a result of the corporate event.
4. ELIGIBLE PERSONS.
(a) With respect to ISO's an Eligible Person means any individual who has
been employed by the Corporation or by any subsidiary of the Corporation for a
continuous period of at least sixty (60) days.
(b) With respect to NSOs an Eligible Person means (i) any individual
who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days, (ii) any
director of the Corporation or any subsidiary of the Corporation (iii) any
member of the Corporation's advisory board member or of any of the Corporation's
subsidiaries, or (iv) any consultant of the Corporation or by any subsidiary of
the Corporation.
5. GRANT OF OPTIONS.
The Board or the Stock Option Committee has the right to issue the Options
established by this Plan to Eligible Persons. The Board or the Stock Option
Committee shall follow the procedures prescribed for it elsewhere in this Plan.
A grant of Options shal1 be set forth in a writing signed on behalf of the
Corporation or by a majority of the members of the Stock Option Committee. The
writing shall identify whether the Option being granted is an ISO or an NSO and
shall set forth the terms, which govern the Option. The terms shall be
determined by the Board or the Stock Option Committee, and may include, among
other terms, the number of shares of Stock that may be acquired pursuant to the
exercise of the Options, when the Options may be exercised, the period for which
the Option is granted and including the expiration date, the effect on the
Options of the Eligible Person terminates employment and whether the Eligible
Person may deliver shares of Stock to pay for the shares of Stock to be
purchased by the exercise of the Option. However, no term shall be set forth in
the writing which is inconsistent with any of the terms of this Plan. The terms
of an Option granted to an Eligible Person may differ from the terms of an
Option granted to another Eligible Person, and may offer form the terms of an
earlier Option granted to the same Eligible Person.
6. OPTION PRICE.
The option price per share shall be determined by the Board or the Stock
Option Committee at the time any Option is granted, and shall be not less than
(i) in the case of an ISO, the fair market value, (ii) in the case of an ISO
granted to a ten percent or greater stockholder, 110% of the fair market value,
or (iii) in the case of an NSO, not less than 75% of the fair market value (but
in no event less than the par value) of one share of Stock on the date the
Option is granted, as determined by the Board or the Stock Option Committee.
Fair market value as used herein shall be:
(a) If shares of Stock shall be traded on an exchange or
over-the-counter market, the closing price or the closing bid price of such
Stock on such exchange or over-the-counter market on which such shares shall be
traded on that date, or if such exchange or over-the-counter market is closed or
if no shares shall have traded on such date, on the last preceding date on which
such shares shall have traded, or such other value as determined by the Board or
the Stock Option Committee of the Corporation.
<PAGE> 131
(b) If shares of Stock shall not be traded on an exchange or
over-the-counter market, the value as determined by the Board or the Stock
Option Committee of the Corporation.
7. PURCHASE OF SHARES.
An Option shall be exercised by the tender to the Corporation of the full
purchase price of the Stock with respect to which the Option is exercised and
written notice of the exercise. The purchase price of the Stock shall be in
United States dollars, payable in cash or by check, or in property or
Corporation stock or Options, if so permitted by the Board or the Stock Option
Committee in accordance with the discretion granted in Paragraph 5 hereof,
having a value equal to such purchase price. The Corporation shall not be
required to issue or deliver any certificates for shares of Stock purchased upon
the exercise of an Option prior to (i) if requested by the Corporation, the
filing with the Corporation by the Eligible Person of a representation in
writing that it is the Eligible Persons then present intention to acquire the
Stock being purchased for investment and not for resale, and/or (ii) the
completion of any registration or other qualification of such shares under any
government regulatory body, which the Corporation shall determine to be
necessary or advisable.
8. GRANT OF RELOAD OPTIONS
In granting an Option under this Plan, the Board or the Stock Option
Committee may, but shall not be obligated to include, a Reload Option provision
therein, subject to the provisions set forth in Paragraphs 20 and 21 herein. A
Reload Option provision provides that if the Eligible Person pays the exercise
price of shares of Stock to be purchased by the exercise of an ISO, NSO or
another Reload Option (the "Original Option") by delivering to the Corporation
shares of Stock already owned by the Eligible Person (the "Tendered Shares"),
the Eligible Person shall receive a Reload Option which shall be a new Option to
purchase shares of Stock equal in number to the tendered shares. The terms of
any Reload Option shall be determined by the Board or the Stock Option Committee
consistent with the provisions of this Plan.
9. STOCK OPTION COMMITTEE
The Stock Option Committee may be appointed from time to time by the Board.
The Board may from time to time remove members from or add members to the Stock
Option Committee. The Stock Option Committee shall be constituted so as to
permit the Plan to comply in all respects with the provisions set forth in
Paragraph 20 herein. The members of the Stock Option Committee may elect one to
its members as its chairman. The Stock Option Committee shall hold its meetings
at such time and places as its chairman shall determine. A majority of the Stock
Option Committee's members present in person shall constitute a quorum for the
transaction of business. All determinations of the Stock Option Committee will
be made by the majority vote of the members constituting the quorum. The members
may participate in a meeting of the Stock Option Committee by conference
telephone or similar communications equipment by means of which all members
participating in the meeting can hear each other. Participation in a meeting in
that manner will constitute presence in person at the meeting. Any decision or
determination reduced to writing and signed by all members of the Stock Option
Committee will be effective as if it had been made by a majority vote of all
members of the Stock Option Committee at a meeting which is duly called and
held.
<PAGE> 132
10. ADMINISTRATION OF PLAN
In addition to granting Options and to exercising the authority granted to
it elsewhere in this Plan, the Board or the Stock Option Committee is granted
the full right and authority to interpret and construe the provisions of this
Plan, promulgate, amend and rescind rules and procedures relating to the
implementation of the Plan and to make all other determinations necessary or
advisable for the administration of the Plan, consistent, however, with the
intent of the Corporation that Options granted or awarded pursuant to the Plan
comply with the provisions of Paragraph 20 and 21 herein. All determinations
made by the Board or the Stock Option Committee shall be final, binding and
conclusive on all persons including the Eligible Person, the Corporation and its
stockholders, employees, officers and directors and consultants. No member of
the Board or the Stock Option Committee will be liable for any act or omission
in connection with the administration of this Plan unless it is attributable to
that member's willful misconduct.
11. PROVISIONS APPLICABLE TO ISOs.
The following provisions shall apply to all ISOs granted by the Board or
the Stock Option Committee and are incorporated by reference into any writing
granting an ISO:
(a) An ISO may only be granted within ten (10) years from June 29,
1999, the date that this Plan was originally adopted by the Board.
(b) An ISO may not be exercised after the expiration of ten (10) years
from the date the ISO is granted.
(c) The option price may not be less than the fair market value of the
Stock at the time the ISO is granted.
(d) An ISO is not transferable by the Eligible Person to whom it is
granted except by will, or the laws of descent and distribution, and is
exercisable during his or her lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the time of the
grant stock possessing more than ten (10%) percent of the total combined voting
power of all classes of stock of the employer corporation or of its parent or
subsidiary corporation (as those terms are defined in the Code) , then the
option price shall be at least 110% of the fair market value of the Stock, and
the ISO shall not be exercisable after the expiration of five (5) years from the
date the ISO is granted.
(f) Even if the shares of Stock which are issued upon exercise of an
ISO are sold within one year following the exercise of such ISO so that the sale
constitutes a disqualifying disposition for ISO treatment under the Code, no
provision of this Plan shall be construed as prohibiting such a sale.
(g) This Plan was adopted by the Corporation on June 29, 1999, by
virtue of its approval by the Board. Approval by the stockholders of the
Corporation is to occur as soon as practicable.
12. DETERMINATION OF FAIR MARKET VALUE
In granting ISOs under this Plan, the Board or the Stock Option Committee
shall make a good faith determination as to the fair market value of the Stock
at the time of granting the ISO.
<PAGE> 133
13. RESTRICTIONS ON ISSUANCE OF STOCK
The Corporation shall not be obligated to sell or issue any shares of Stock
pursuant to the exercise of an Option unless the Stock with respect to which the
Option is being exercised is at that time effectively registered or exempt from
registration under the Securities Act of 1933, as amended, and any other
applicable laws, rules and regulations. The Corporation may condition the
exercise of an Option granted in accordance herewith upon receipt from the
Eligible Person, or any other purchaser thereof, of a written representation
that at the time of such exercise it is his or her then present intention to
acquire the shares of Stock for investment and not with a view to, or for sale
in connection with, any distribution thereof; except that, in the case of a
legal representative of an Eligible Person, "distribution" shall be defined to
exclude distribution by will or under the laws of descent and distribution.
Prior to issuing any shares of Stock pursuant to the exercise of an Option, the
Corporation shall take such steps as it deems necessary to satisfy any
withholding tax obligations imposed upon it by any level of government.
14. EXERCISE IN THE EVENT OF DEATH OR TERMINATION OF TRANSFEREE
(a) If an optionee shall die while an employee of the Corporation or a
Subsidiary or within three months after termination of his employment with the
Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination of
employment by the person or persons to whom the optionee's rights under the
Option pass by will or applicable law, or if no such person has such right, by
his executors or administrators, at any time, or from time to time. In the
event of termination of employment because of his death while an employee or
because of disability, his Options may be exercised not later than the
expiration date specified in Paragraph 5 or one year after the optionee's death,
whichever date is earlier, or in the event of termination of employment
because of retirement or otherwise, not later than the expiration date specified
in Paragraph 5 hereof or one year after the optionee's death, whichever date is
earlier.
(b) If an optionee's employment by the Corporation or a Subsidiary shall
terminate because of his disability and such optionee has not died within the
following three months, he may exercise his Options, to the extent that he shall
have been entitled to do so at the date of the termination of his
employment, at any time, or from time to time, but not later than the expiration
date specified in Paragraph 5 hereof or one year after termination of
employment, whichever date is earlier.
(c) If an optionee's employment shall terminate by reason of his
retirement in accordance with the terms of the (c) If an optionee's employment
shall terminate by reason of his retirement in accordance with the terms of the
Corporation's retirement plans or with the consent of the Board or the Stock
Option Committee or involuntarily other than by termination for cause, and such
optionee had not died within the following three months, he may exercise his
Option to the extent he shall have been entitled to do so at the date of the
termination of his employment, at any time and from time to time, but not later
than the expiration date specified in Paragraph 5 hereof.
(d) If an optionee's employment shall terminate for cause, all right to
exercise his Options shall terminate at the date of such termination of
employment.
<PAGE> 134
15. CORPORATE EVENTS
In the event of the proposed dissolution or liquidation of the Corporation,
a proposed sale of all or substantially all of the assets of the Corporation, a
merger or tender for the Corporation's shares of Common Stock the Board shall
declare that each Option granted under this Plan shall terminate as of a date to
be fixed by the Board; provided that not less than thirty (30) days written
notice of the date so fixed shall be given to each Eligible Person holding an
Option, and each such Eligible Person shall have the right, during the period of
thirty (30) days preceding such termination, to exercise his Option as to all or
any part of the shares of Stock covered thereby, including shares of Stock as to
which such Option would not otherwise be exercisable. Nothing set forth herein
shall extend the term set for purchasing the shares of Stock set forth in the
Option.
16. NO GUARANTEE OF EMPLOYMENT
Nothing in this Plan or in any writing granting an Option will confer upon
any Eligible Person the right to continue in the employ of the Eligible Person's
employer, or will interfere with or restrict in any way the right of the
Eligible Person's employer to discharge such Eligible Person at any time for any
reason whatsoever, with or without cause.
17. NONTRANSFERABILITY
No Option granted under the Plan shall be transferable other than by will
or by the laws of descent and distribution. During the lifetime of the optionee,
an Option shall be exercisable only by him.
18. NO RIGHTS AS STOCKHOLDER
No optionee shall have any rights as a stockholder with respect to any
shares subject to his Option prior to the date of issuance to him of a
certificate or certificates for such shares.
19. AMENDMENT AND DISCONTINUANCE OF PLAN
The Board may amend, suspend or discontinue this Plan at any time. However,
no such action may prejudice the rights of any Eligible Person who has prior
thereto been granted Options under this Plan. Further, no amendment to this Plan
which has the effect of (a) increasing the aggregate number of shares of Stock
subject to this Plan (except for adjustments pursuant to Paragraph 3 herein), or
(b) changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Board is authorized to
seek the approval of the Corporation's stockholders for any other changes it
proposes to make to this Plan which require such approval, however, the Board
may modify the Plan as necessary, to effectuate the intent of the Plan as a
result of any changes in the tax, accounting or securities laws treatment of
Eligible Persons and the Plan, subject to the provisions set forth in this
Paragraph 19, and Paragraphs 20 and 21.
20 COMPLIANCE WITH RULE l6B-3
This Plan is intended to comply in all respects with Rule 16b-3 ("Rule
16b-3") promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect
to participants who are subject to Section 16 of the Exchange Act, and any
provision(s) herein that is/are contrary to Rule 16b-3 shall be deemed null and
void to the extent appropriate by either the Stock Option Committee or the
Board.
<PAGE> 135
21. COMPLIANCE WITH CODE
The aspects of this Plan on ISOs are intended to comply in every respect
with Section 422 of the Code and the regulations promulgated thereunder. In the
event any future statute or regulation shall modify the existing stature, the
aspects of this Plan on ISOs shall be deemed to incorporate by reference such
modification. Any stock option agreement relating to any Option granted pursuant
to this Plan outstanding and unexercised at the time any modifying statute or
regulation becomes effective shall also be deemed to incorporate by reference
such modification and no notice of such modification need to be given to
optionee.
If any provision of the aspects of this Plan on ISOs is determined to
disqualify the shares purchasable pursuant to the Options granted under this
Plan from the special tax treatment provided by Code Section 422, such provision
shall be deemed null and void and to incorporate by reference the modification
required to qualify the shares for said tax treatment.
22. COMPLIANCE WITH OTHER LAWS AND REGULATIONS
The Plan, the grant and exercise of Options thereunder, and the obligation
of the Corporation to sell and deliver Stock under such options, shall be
subject to all applicable federal and state laws, rules, and regulations and to
such approvals by any government or regulatory agency as may be required. The
Corporation shall not be required to issue or deliver any certificates for
shares of Stock prior to (a) the listing of such shares on any stock exchange or
over-the-counter market on which the Stock may then be fisted and (b) the
completion of any registration or qualification of such shares under any federal
or state law, or any ruling or regulation of any government body which the
Corporation shall, in its sole discretion, determine to be necessary or
advisable. Moreover, no option may be exercised if its exercise or the receipt
of Stock pursuant thereto would be contrary to applicable laws.
23. DISPOSITION OF SHARES.
In the event any share of Stock acquired by an exercise of an Option
granted under the Plan shall be transferable other than by will or by the laws
of descent and distribution within two years of the date such Option was granted
or within one year after the transfer of such Stock pursuant to such exercise,
the optionee shall give prompt written notice thereof to the Corporation or the
Stock Option Committee.
24. NAME.
The Plan shall be known as the "Beacon Light 1999 Stock Option Plan."
25. NOTICES
Any notice hereunder shall be in writing and sent by certified mail, return
receipt requested or by facsimile transmission (with electronic or written
confirmation of receipt) and when addressed to the Corporation shall be sent to
it at its office, 100 Pearl Street - 14th Floor, Hartford, Connecticut 06103 and
when addressed to the Committee shall be sent to it, 100 Pearl Street - 14th
Floor, Hartford, Connecticut 06103, subject to the right of either party to
designate at any time hereafter in writing some other address, facsimile number
or person to whose attention such notice shall be sent.
<PAGE> 136
26. HEADINGS
The headings preceding the text of Sections and subparagraphs hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Plan nor shall they affect its meaning, construction or effect.
27. EFFECTIVE DATE
The Plan, was adopted by the Board on November 22, 1999. The effective date
of the Plan shall be the same date.
Dated as of November 22, 1999
BEACON LIGHT HOLDING CORPORATION
By:/s/ Jerry Gruenbaum
---------------------
Jerry Gruenbaum
Its President
137
EX-10.2
EMPLOYMENT AGREEMENT WITH JERRY GRUENBAUM
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and effective this 2nd day of January, 2000.
BETWEEN:
BEACON LIGHT HOLDING CORPORATION, Incorporated pursuant to the laws of the
State of Nevada,
(herein called the "Corporation")
OF THE FIRST PART
AND:
JERRY GRUENBAUM, a resident of the State of Connecticut
(herein called the "Executive")
OF THE SECOND PART
WHEREAS the Corporation is currently employing the Executive and the
parties desire to enter into this agreement (the Employment Agreement") to
review the terms of such employment.
IN CONSIDERATION of the recitals and mutual covenants contained herein and
for other good and valuable consideration, the parties agree as follows:
1. EMPLOYMENT
The Corporation hereby employs the Executive and the Executive hereby accepts
employment with the Corporation for the term of this Employment Agreement set
forth in Section 2 below, in a position and with the duties, responsibilities
and authority as the Executive has ordinarily heretofore enjoyed and as the
Corporation may, from time to time, reasonably assign to him commensurate with
his office including those duties, responsibilities and authority more
particularly set forth in Section 3 below, and upon all other terms and
conditions set forth in this Employment Agreement.
2. TERM
The term (the "term") of the Executive's employment shall commence on the later
of the date above and shall continue until December 31, 2004, subject to those
provisions of this Employment Agreement providing for earlier termination of the
Executive's employment in certain circumstances. Thereafter, the term may be
extended for additional five-year periods from and after December 31, 2,004 upon
the agreement of the Executive and the Board of Directors of the Corporation,
subject always to the provisions of paragraph 9 hereof.
3. POSITION, RESPONSIBILITY
It is intended that the Executive shall serve as the President of the
Corporation.
<PAGE> 138
Throughout the term of this Employment Agreement, the Executive shall
devote substantially his full business time and attention during normal business
hours to the business and affairs of the Corporation, except for vacations and
except for illness or incapacity. Subject to Section 9, and subject to the
approval of the Board of Directors of the Corporation, which will not be
unreasonably withheld, nothing in this Employment Agreement shall preclude the
Executive from devoting reasonable periods required for serving, as appropriate,
on the Boards of Directors of other corporations, from engaging in charitable
and public service activities, and from managing his personal investments,
provided such activities do not materially interfere with the performance of his
duties and responsibilities under this Employment Agreement and do not
constitute a conflict of interest with respect to his employment herein.
4. REMUNERATION: CASH, STOCK AND STOCK OPTIONS.
(a) Cash - For services rendered by the Executive during the term of
this Agreement, the Executive shall be entitled to receive aggregate annual base
pay remuneration in cash in the amount of $60,000, payable semi-monthly.
(b) Stock - The Corporation shall grant to the Executive 500,000
Rule 144 Common Shares in the capital stock of Beacon Light. For income
purposes, the company values said Rule 144 Common Shares at $0.05 per share, as
the stock is freely trading on this date at $0.12 per share. Said shares have a
total value of $25,000 for remuneration on this date. Said shares may not be
pledged, margined or sold for a period of two years and is subject to any other
conditions as may be imposed by U.S. Securities laws.
(c) Stock Options - The Corporation shall grant to the Executive a five
year Stock Option for a total of 250,000 Common Shares in the capital stock of
Beacon Light exercisable at $0.15 per share. The granting of these options is
expressly subject to the approval of the board of directors as well as all terms
and conditions as may be imposed by U.S. Securities law.
(d) Remuneration Reviews - The Executive will have annual compensation
reviews shortly after December 1st of each year. These compensation reviews will
result in an increase of no less than 15% of base pay effective on each December
1st thereafter. The review can occur before or after that date but the
compensation must be effective that date.
5. PERQUISITES AND BUSINESS EXPENSES
The Executive will receive in addition to remuneration in paragraph 4 a car
allowance of $500 per month and shall be reimbursed for all reasonable expenses
incurred by him in connection with the conduct of the Corporation's business
upon presentation of sufficient evidence of such expenditures and provided the
same are authorized expenditures pursuant to policies adopted by the Board of
Directors of the Corporation from time to time.
6. BENEFIT PROGRANS
The Executive will be entitled to participate in all Executive benefit
programs of the Corporation from time to time in effect under the terms and
conditions of such programs, including, but not limited to, pension, share
incentive and other benefit plans, group life insurance, hospitalization and
surgical and major medical coverage, dental insurance, sick leave, including
salary continuation arrangements, vacations and holidays, long-term disability,
and such other fringe benefits as are or may be available from time to time to
other executives of the Corporation.
<PAGE> 139
7. VACATION
The Executive shall be entitled to all usual public holidays and, in
addition, 3 weeks annual vacation during each year of employment hereunder. Such
vacation time shall be utilized by the Executive at mutually reasonably
acceptable times.
8. TERMINATION OF EMPLOYMENT
For the full term of this agreement the Executive cannot be terminated by the
Corporation without cause.
(a) Death - In the event of the death of the Executive during the term
of this Employment Agreement, the Executive's salary will be paid to the
Executive's designated beneficiary, and in the absence of such designation, to
the estate or other legal representatives of the Executive, through the end of
the month in which death occurs, Rights and benefits of the Executive under the
Executive benefit plans and programs of the Corporation, including life
insurance, will be determined in accordance with the terms and conditions of
such plans and programs.
(b) Disability - The Executive's employment shall terminate
automatically upon written notice from the Corporation in the event of the
Executive's absence or inability to render the services required hereunder due
to disability, illness, incapacity or otherwise for an aggregate of one hundred
and eighty days during any 12 month period during the term, In the event of any
such absence or inability, the Executive shall be entitled to receive the
compensation provided for herein for such period, and thereafter the Executive
shall be entitled to receive compensation in accordance with the Corporation's
long-term disability plan, if any, together with such compensation, if any, as
may be determined by the Board of Directors of the Corporation.
(c) Termination by the Corporation for Cause - In the event of a
termination for cause, there will be no continued salary payments by the
Corporation to the Executive and any rights and benefits of the Executive under
the Executive benefit plans and programs of the Corporation will be determined
in accordance with the terms of such plans and programs. For the purposes of
this Sub Section and of the Executive's employment with the Corporation, "cause"
shall mean that:
(i) The Executive has committed a felony or indictable offence or has
improperly enriched himself at the expense of the Corporation or has committed
an act evidencing dishonesty or moral turpitude, including without limitation an
act of theft;
(ii) The Executive, in carrying out his duties hereunder, (A) has been
willfully or grossly negligent, or (B) has committed willful and gross
misconduct or, (C) has failed to comply with clear and reasonable, instructions
or directives from the Board of Directors of the Corporation after having been
informed in writing of a failure to so comply having been given reasonable
opportunity to comply or correct a matter;
(iii) The Executive has breached a material term of this Employment
Agreement and such breach is either not promptly remedied upon notice or is
incapable of remedy;
(iv) The Executive becomes bankrupt or in the event a receiving order
(or any analogous order under any applicable law) is made against the Executive
or in the event the Executive makes any general disposition or assignment for
the benefit of his creditors which materially interferes with his ability to
render services hereunder,
<PAGE> 140
(v) The Executive commits any other act giving the Corporation cause to
terminate the Executive's employment, including, but not limited to chronic
alcoholism or drug addiction, material malfeasance or nonfeasance with respect
to the Executive's duties hereunder.
Prior to any termination of the Executive for cause due to the first only
of any occurrence described in subparagraphs ii), (iii), and (v) above, the
Corporation shall notify the Executive in writing of the particulars of the
occurrence upon which termination would be based and shall in such notice advise
the Executive as to whether, in that Corporation's reasonable opinion, the
default of the Executive occasioned by such occurrence is capable of being cured
or rectified in full without material loss or damage to the Corporation, in
which case the Corporation shall afford the Executive a reasonable period of not
less than five business days in which to cure or rectify such default. In such
event and provided the Executive cures or rectifies such default in full without
material loss or damage to the Corporation, the Executive's employment shall not
be terminated on the basis of such occurrence.
(d) Termination by the Executive - The Executive shall be entitled to
terminate this agreement at any time upon giving the Corporation three (3)
months written notice.
9. NON-COMPETITION
(a) The Executive agrees that during the period of the Executive's
employment with the Corporation and for a period of twelve months from the last
payment of monthly compensation to the Executive by the Corporation, the
Executive shall not engage in or participate in any business activity that
competes, directly in the Global market, with the business of the Corporation,
or that of any parent, subsidiary or affiliate companies, organizations or
entities. For purposes of this Section the business of the Corporation means
that area of telecommunications presently engaged in by the Company and includes
all future activities as may be described in the business plan of the company as
approved by the Board of Directors from time to time.
(b) For the purposes of this Section, the Executive shall be deemed to
"compete, directly or indirectly, with the business of the Corporation or its
parent, subsidiary, or affiliate companies, organizations or entities" if the
Executive is or becomes engaged, otherwise than at the request of the
Corporation, as an officer, director or the Executive of, or is or becomes
associated in a management, employee, ownership, consultancy or agency capacity
with any corporation, partnership or other enterprise or venture whose business
includes the distribution of competing services or products.
(c) It is the desire and intent of the parties that the provisions of
this Section shall be enforceable to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section is adjudicated
unenforceable in any jurisdiction such adjudication shall apply only in that
particular jurisdiction in which such adjudication is made.
10. NON-SOLICITATION
The Executive agrees that for a period of one year following the
termination of the Executive's employment with the Corporation, for any reason
whatsoever, the Executive will not, whether as principal, agent, executive,
employer, director, officer, shareholder or in any other individual or
representative capacity, solicit or attempt to retain in any way whatsoever, any
of the Executives or employees of either of the Corporation or its parent,
subsidiary or affiliate companies, organizations or entities.
<PAGE> 141
11. CONFIDENTIAL INFORMATION
All confidential records, material and information and copies thereof and
any and all trade secrets concerning the business or affairs of the Corporation
or any of its parent, subsidiary, or affiliate companies, organizations or
entities, obtained by the Executive in the course and by the reason of his
employment shall remain the exclusive property of that Corporation. During the
Executive's employment or at any time thereafter, the Executive shall not
divulge the contents of such confidential records or any of such confidential
information or trade secrets to any person other than to the Corporation, or to
the Corporation's qualified Officers or Executives, and the Executive shall not,
following the termination of his employment hereunder, for any reason use the
contents of such confidential records or other confidential information or trade
secrets for any purpose whatsoever.
12. WITHHOLDING
Anything to the contrary notwithstanding, all payments required to be made
by the Corporation hereunder to the Executive or his estate or beneficiaries,
shall be subject to the withholding of such amounts relating to taxes as the
Corporation may reasonably determine, after consultation with the Executive, it
should withhold pursuant to any applicable law or regulation. In lieu of
withholding such amounts, in whole or in part, the Corporation may, in its sole
discretion, accept other provisions for payment of taxes and withholdings as
required by law, provided that the Corporation is satisfied that all
requirements of law affecting the Corporation's responsibilities to withhold
have been complied with.
13. ENTIRE AGREEMENT
This Employment Agreement contains the entire agreement between the parties
hereto with respect to matters herein and supersedes all prior agreements and
understandings, oral or written, between the parties hereto relating to such
matters.
14. ASSIGNMENT
Except as herein expressly provided, the respective rights and obligations
of the Executive and the Corporation under this Employment Agreement shall not
be assignable by either party without the written consent of the other party and
shall enure to the benefit of and be binding upon the Executive and the
Corporation and their permitted successors or assigns, including, in the case of
the Corporation, any other corporation or entity with which such Corporation may
be merged or otherwise combined or which may acquire that Corporation or its
assets in whole or in substantial part, and, in the case of the Executive, his
estate or other legal representatives. Nothing herein expressed or implied is
intended to confer on any person other than the parties hereto any rights,
remedies, obligations or liabilities under or by reason of this Employment
Agreement.
15. APPLICABLE LAW
This Employment Agreement shall be deemed a contract under, and for all
purposes shall be governed by and construed in accordance with, the laws of the
State of Connecticut without regard to the conflict of laws rules thereof. The
Corporation and the Executive hereby irrevocably consent and affirm to the
jurisdiction of the courts of the State of Connecticut with respect to any
dispute or proceeding arising in connection with this Employment Agreement.
<PAGE> 142
16. AMENDMENT OR MODIFICATION: WAIVER
No provision of this Employment Agreement may be amended or waived unless
such amendment or waiver is authorized by the Corporation (including any
authorized officer or committee of the Board of Directors) and is in writing
signed by the Executive and by a duly authorized officer of The Corporation.
Except as otherwise specifically provided in this Employment Agreement, no
waiver by any party hereto of any breach by the other parties of any condition
or provision of this Employment Agreement to be performed by such other party or
parties shall be deemed a waiver of a similar or dissimilar breach, condition or
provision at the same time or at any prior or subsequent time.
17. PROVISIONS SURVIVING TERMINATION
It is expressly agreed that notwithstanding termination of the Executive's
employment with and by the Corporation for any reason or cause or in any
circumstances whatsoever, such termination shall be without prejudice to the
rights and obligations of the Executive and the Corporation, in relation or
arising up to the time up to and including the date of termination; and the
provisions of Sections 9 through 12 inclusive, shall all remain and continue in
full forte and effect.
18. SEVERABILITY
In the event that any provision or portion of this Employment Agreement
shall be determined to be invalid or unenforceable for any reason, the remaining
provisions and portions of this Employment Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
19. COUNTERPARTS
This Employment Agreement may be executed in counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
20. REFERENCE
In the event of the Executive's death or a judicial determination of his
incompetency, reference in this Employment Agreement to the Executive shall be
deemed, where appropriate, to refer to his beneficiary or beneficiaries.
21. CAPTIONS
Captions to the Sections of this Employment Agreement are solely for
convenience and no provision of this Agreement is to be construed by reference
to the captions of that Section.
BEACON LIGHT HOLDING CORPORATION
By: /s/Hans Lodders
-----------------------------
Hans Lodders, Board Chairman
143
EX-10.3
EMPLOYMENT AGREEMENT WITH HANS LODDERS
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and effective this 2nd day of January, 2000.
BETWEEN:
BEACON LIGHT HOLDING CORPORATION, Incorporated pursuant to the laws of the
State of Nevada,
(herein called the "Corporation")
OF THE FIRST PART
AND:
HANS LODDERS, a resident of Hong Kong
(herein called the "Executive")
OF THE SECOND PART
WHEREAS the Corporation is currently employing the Executive and the
parties desire to enter into this agreement (the Employment Agreement") to
review the terms of such employment.
IN CONSIDERATION of the recitals and mutual covenants contained herein and for
other good and valuable consideration, the parties agree as follows:
1. EMPLOYMENT
The Corporation hereby employs the Executive and the Executive hereby accepts
employment with the Corporation for the term of this Employment Agreement set
forth in Section 2 below, in a position and with the duties, responsibilities
and authority as the Executive has ordinarily heretofore enjoyed and as the
Corporation may, from time to time, reasonably assign to him commensurate with
his office including those duties, responsibilities and authority more
particularly set forth in Section 3 below, and upon all other terms and
conditions set forth in this Employment Agreement.
2. TERM
The term (the "term") of the Executive's employment shall commence on the
later of the date above and shall continue until December 31, 2004, subject to
those provisions of this Employment Agreement providing for earlier termination
of the Executive's employment in certain circumstances. Thereafter, the term may
be extended for additional five-year periods from and after December 31, 2,004
upon the agreement of the Executive and the Board of Directors of the
Corporation, subject always to the provisions of paragraph 9 hereof.
3. POSITION, RESPONSIBILITY
It is intended that the Executive shall serve as the Managing Director of Asia
Business Division of the Corporation.
<PAGE> 144
Throughout the term of this Employment Agreement, the Executive shall
devote substantially his full business time and attention during normal business
hours to the business and affairs of the Corporation, except for vacations and
except for illness or incapacity. Subject to Section 9, and subject to the
approval of the Board of Directors of the Corporation, which will not be
unreasonably withheld, nothing in this Employment Agreement shall preclude the
Executive from devoting reasonable periods required for serving, as appropriate,
on the Boards of Directors of other corporations, from engaging in charitable
and public service activities, and from managing his personal investments,
provided such activities do not materially interfere with the performance of his
duties and responsibilities under this Employment Agreement and do not
constitute a conflict of interest with respect to his employment herein.
4. REMUNERATION: CASH AND STOCK OPTIONS.
(a) Cash - For services rendered by the Executive during the term of
this Agreement, the Executive shall be entitled to receive aggregate annual base
pay remuneration in cash in the amount of $60,000, payable semi-monthly.
(b) Stock - The Corporation shall grant to the Executive 500,000
Rule 144 Common Shares in the capital stock of Beacon Light. For income
purposes, the company values said Rule 144 Common Shares at $0.05 per share, as
the stock is freely trading on this date at $0.12 per share. Said shares have a
total value of $25,000 for remuneration on this date. Said shares may not be
pledged, margined or sold for a period of two years and is subject to any other
conditions as may be imposed by U.S. Securities laws.
(c) Stock Options - The Corporation shall grant to the Executive a five
year Stock Option for a total of 250,000 Common Shares in the capital stock of
Beacon Light exercisable at $0.15 per share. The granting of these options is
expressly subject to the approval of the board of directors as well as all terms
and conditions as may be imposed by U.S, Securities law.
(d) Remuneration Reviews - The Executive will have annual compensation
reviews shortly after December 1st of each year. These compensation reviews will
result in an increase of no less than 15% of base pay effective on each December
1st thereafter. The review can occur before or after that date but the
compensation must be effective that date.
5. PERQUISITES AND BUSINESS EXPENSES
The Executive shall be reimbursed for all reasonable expenses incurred by
him in connection with the conduct of the Corporation's business upon
presentation of sufficient evidence of such expenditures and provided the same
are authorized expenditures pursuant to policies adopted by the Board of
Directors of the Corporation from time to time.
6. BENEFIT PROGRANS
The Executive will be entitled to participate in all Executive benefit
programs of the Corporation from time to time in effect under the terms and
conditions of such programs, including, but not limited to, pension, share
incentive and other benefit plans, group life insurance, hospitalization and
surgical and major medical coverage, dental insurance, sick leave, including
salary continuation arrangements, vacations and holidays, long-term disability,
and such other fringe benefits as are or may be available from time to time to
other executives of the Corporation.
<PAGE> 145
7. VACATION
The Executive shall be entitled to all usual public holidays and, in
addition, 3 weeks annual vacation during each year of employment hereunder. Such
vacation time shall be utilized by the Executive at mutually reasonably
acceptable times.
8. TERMINATION OF EMPLOYMENT
For the full term of this agreement the Executive cannot be terminated by
the Corporation without cause.
(a) Death - In the event of the death of the Executive during the term
of this Employment Agreement, the Executive's salary will be paid to the
Executive's designated beneficiary, and in the absence of such designation, to
the estate or other legal representatives of the Executive, through the end of
the month in which death occurs, Rights and benefits of the Executive under the
Executive benefit plans and programs of the Corporation, including life
insurance, will be determined in accordance with the terms and conditions of
such plans and programs.
(b) Disability - The Executive's employment shall terminate
automatically upon written notice from the Corporation in the event of the
Executive's absence or inability to render the services required hereunder due
to disability, illness, incapacity or otherwise for an aggregate of one hundred
and eighty days during any 12 month period during the term, In the event of any
such absence or inability, the Executive shall be entitled to receive the
compensation provided for herein for such period, and thereafter the Executive
shall be entitled to receive compensation in accordance with the Corporation's
long-term disability plan, if any, together with such compensation, if any, as
may be determined by the Board of Directors of the Corporation.
(c) Termination by the Corporation for Cause - In the event of a
termination for cause, there will be no continued salary payments by the
Corporation to the Executive and any rights and benefits of the Executive under
the Executive benefit plans and programs of the Corporation will be determined
in accordance with the terms of such plans and programs. For the purposes of
this Sub Section and of the Executive's employment with the Corporation, "cause"
shall mean that:
(i) The Executive has committed a felony or indictable offence or
has improperly enriched himself at the expense of the Corporation or has
committed an act evidencing dishonesty or moral turpitude, including without
limitation an act of theft;
(ii) The Executive, in carrying out his duties hereunder, (A) has
been willfully or grossly negligent, or (B) has committed willful and gross
misconduct or, (C) has failed to comply with clear and reasonable, instructions
or directives from the Board of Directors of the Corporation after having been
informed in writing of a failure to so comply having been given reasonable
opportunity to comply or correct a matter;
(iii) The Executive has breached a material term of this
Employment Agreement and such breach is either not promptly remedied upon notice
or is incapable of remedy;
(iv) The Executive becomes bankrupt or in the event a receiving
order (or any analogous order under any applicable law) is made against the
Executive or in the event the Executive makes any general disposition or
assignment for the benefit of his creditors which materially interferes with his
ability to render services hereunder,
<PAGE> 146
(v) The Executive commits any other act giving the Corporation
cause to terminate the Executive's employment, including, but not limited to
chronic alcoholism or drug addiction, material malfeasance or nonfeasance with
respect to the Executive's duties hereunder.
Prior to any termination of the Executive for cause due to the first only
of any occurrence described in subparagraphs ii), (iii), and (v) above, the
Corporation shall notify the Executive in writing of the particulars of the
occurrence upon which termination would be based and shall in such notice advise
the Executive as to whether, in that Corporation's reasonable opinion, the
default of the Executive occasioned by such occurrence is capable of being cured
or rectified in full without material loss or damage to the Corporation, in
which case the Corporation shall afford the Executive a reasonable period of not
less than five business days in which to cure or rectify such default. In such
event and provided the Executive cures or rectifies such default in full without
material loss or damage to the Corporation, the Executive's employment shall not
be terminated on the basis of such occurrence.
(d) Termination by the Executive - The Executive shall be entitled to
terminate this agreement at any time upon giving the Corporation three (3)
months written notice.
9. NON-COMPETITION
(a) The Executive agrees that during the period of the Executive's
employment with the Corporation and for a period of twelve months from the last
payment of monthly compensation to the Executive by the Corporation, the
Executive shall not engage in or participate in any business activity that
competes, directly in the Global market, with the business of the Corporation,
or that of any parent, subsidiary or affiliate companies, organizations or
entities. For purposes of this Section the business of the Corporation means
that area of telecommunications presently engaged in by the Company and includes
all future activities as may be described in the business plan of the company as
approved by the Board of Directors from time to time.
(b) For the purposes of this Section, the Executive shall be deemed to
"compete, directly or indirectly, with the business of the Corporation or its
parent, subsidiary, or affiliate companies, organizations or entities" if the
Executive is or becomes engaged, otherwise than at the request of the
Corporation, as an officer, director or the Executive of, or is or becomes
associated in a management, employee, ownership, consultancy or agency capacity
with any corporation, partnership or other enterprise or venture whose business
includes the distribution of competing services or products.
(c) It is the desire and intent of the parties that the provisions of
this Section shall be enforceable to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section is adjudicated
unenforceable in any jurisdiction such adjudication shall apply only in that
particular jurisdiction in which such adjudication is made.
10. NON-SOLICITATION
The Executive agrees that for a period of one year following the
termination of the Executive's employment with the Corporation, for any reason
whatsoever, the Executive will not, whether as principal, agent, executive,
employer, director, officer, shareholder or in any other individual or
representative capacity, solicit or attempt to retain in any way whatsoever, any
of the Executives or employees of either of the Corporation or its parent,
subsidiary or affiliate companies, organizations or entities.
<PAGE> 147
11. CONFIDENTIAL INFORMATION
All confidential records, material and information and copies thereof and
any and all trade secrets concerning the business or affairs of the Corporation
or any of its parent, subsidiary, or affiliate companies, organizations or
entities, obtained by the Executive in the course and by the reason of his
employment shall remain the exclusive property of that Corporation. During the
Executive's employment or at any time thereafter, the Executive shall not
divulge the contents of such confidential records or any of such confidential
information or trade secrets to any person other than to the Corporation, or to
the Corporation's qualified Officers or Executives, and the Executive shall not,
following the termination of his employment hereunder, for any reason use the
contents of such confidential records or other confidential information or trade
secrets for any purpose whatsoever.
12. WITHHOLDING
Anything to the contrary notwithstanding, all payments required to be made
by the Corporation hereunder to the Executive or his estate or beneficiaries,
shall be subject to the withholding of such amounts relating to taxes as the
Corporation may reasonably determine, after consultation with the Executive, it
should withhold pursuant to any applicable law or regulation. In lieu of
withholding such amounts, in whole or in part, the Corporation may, in its sole
discretion, accept other provisions for payment of taxes and withholdings as
required by law, provided that the Corporation is satisfied that all
requirements of law affecting the Corporation's responsibilities to withhold
have been complied with.
13. ENTIRE AGREEMENT
This Employment Agreement contains the entire agreement between the parties
hereto with respect to matters herein and supersedes all prior agreements and
understandings, oral or written, between the parties hereto relating to such
matters.
14. ASSIGNMENT
Except as herein expressly provided, the respective rights and obligations
of the Executive and the Corporation under this Employment Agreement shall not
be assignable by either party without the written consent of the other party and
shall enure to the benefit of and be binding upon the Executive and the
Corporation and their permitted successors or assigns, including, in the case of
the Corporation, any other corporation or entity with which such Corporation may
be merged or otherwise combined or which may acquire that Corporation or its
assets in whole or in substantial part, and, in the case of the Executive, his
estate or other legal representatives. Nothing herein expressed or implied is
intended to confer on any person other than the parties hereto any rights,
remedies, obligations or liabilities under or by reason of this Employment
Agreement.
15. APPLICABLE LAW
This Employment Agreement shall be deemed a contract under, and for all
purposes shall be governed by and construed in accordance with, the laws of the
State of Connecticut without regard to the conflict of laws rules thereof. The
Corporation and the Executive hereby irrevocably consent and affirm to the
jurisdiction of the courts of the State of Connecticut with respect to any
dispute or proceeding arising in connection with this Employment Agreement.
<PAGE> 148
16. AMENDMENT OR MODIFICATION: WAIVER
No provision of this Employment Agreement may be amended or waived unless
such amendment or waiver is authorized by the Corporation (including any
authorized officer or committee of the Board of Directors) and is in writing
signed by the Executive and by a duly authorized officer of The Corporation.
Except as otherwise specifically provided in this Employment Agreement, no
waiver by any party hereto of any breach by the other parties of any condition
or provision of this Employment Agreement to be performed by such other party or
parties shall be deemed a waiver of a similar or dissimilar breach, condition or
provision at the same time or at any prior or subsequent time.
17. PROVISIONS SURVIVING TERMINATION
It is expressly agreed that notwithstanding termination of the Executive's
employment with and by the Corporation for any reason or cause or in any
circumstances whatsoever, such termination shall be without prejudice to the
rights and obligations of the Executive and the Corporation, in relation or
arising up to the time up to and including the date of termination; and the
provisions of Sections 9 through 12 inclusive, shall all remain and continue in
full forte and effect.
18. SEVERABILITY
In the event that any provision or portion of this Employment Agreement
shall be determined to be invalid or unenforceable for any reason, the remaining
provisions and portions of this Employment Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
19. COUNTERPARTS
This Employment Agreement may be executed in counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
20. REFERENCE
In the event of the Executive's death or a judicial determination of his
incompetency, reference in this Employment Agreement to the Executive shall be
deemed, where appropriate, to refer to his beneficiary or beneficiaries.
21. CAPTIONS
Captions to the Sections of this Employment Agreement are solely for
convenience and no provision of this Agreement is to be construed by reference
to the captions of that Section.
BEACON LIGHT HOLDING CORPORATION
By: /s/Jerry Gruenbaum_____________
--------------------------------
Jerry Gruenbaum, President
149
EX-10.4
EMPLOYMENT AGREEMENT WITH RONALD STEENBERGEN
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and effective this 2nd day of January, 2000.
BETWEEN:
BEACON LIGHT HOLDING CORPORATION, Incorporated pursuant to the laws of the
State of Nevada,
(herein called the "Corporation")
OF THE FIRST PART
AND:
RONALD STEENBERGEN, a resident of Hong Kong
(herein called the "Executive")
OF THE SECOND PART
WHEREAS the Corporation is currently employing the Executive and the
parties desire to enter into this agreement (the Employment Agreement") to
review the terms of such employment.
IN CONSIDERATION of the recitals and mutual covenants contained herein and
for other good and valuable consideration, the parties agree as follows:
1. EMPLOYMENT
The Corporation hereby employs the Executive and the Executive hereby
accepts employment with the Corporation for the term of this Employment
Agreement set forth in Section 2 below, in a position and with the duties,
responsibilities and authority as the Executive has ordinarily heretofore
enjoyed and as the Corporation may, from time to time, reasonably assign to him
commensurate with his office including those duties, responsibilities and
authority more particularly set forth in Section 3 below, and upon all other
terms and conditions set forth in this Employment Agreement.
2. TERM
The term (the "term") of the Executive's employment shall commence on the
later of the date above and shall continue until December 31, 2004, subject to
those provisions of this Employment Agreement providing for earlier termination
of the Executive's employment in certain circumstances. Thereafter, the term may
be extended for additional five-year periods from and after December 31, 2,004
upon the agreement of the Executive and the Board of Directors of the
Corporation, subject always to the provisions of paragraph 9 hereof.
3. POSITION, RESPONSIBILITY
It is intended that the Executive shall serve as the Managing Director of
Operating Companies of the Corporation.
<PAGE> 150
Throughout the term of this Employment Agreement, the Executive shall
devote substantially his full business time and attention during normal business
hours to the business and affairs of the Corporation, except for vacations and
except for illness or incapacity. Subject to Section 9, and subject to the
approval of the Board of Directors of the Corporation, which will not be
unreasonably withheld, nothing in this Employment Agreement shall preclude the
Executive from devoting reasonable periods required for serving, as appropriate,
on the Boards of Directors of other corporations, from engaging in charitable
and public service activities, and from managing his personal investments,
provided such activities do not materially interfere with the performance of his
duties and responsibilities under this Employment Agreement and do not
constitute a conflict of interest with respect to his employment herein.
4. REMUNERATION: CASH AND STOCK OPTIONS.
(a) Cash - For services rendered by the Executive during the term of
this Agreement, the Executive shall be entitled to receive aggregate annual base
pay remuneration in cash in the amount of $60,000, payable semi-monthly.
(b) Stock - The Corporation shall grant to the Executive 500,000
Rule 144 Common Shares in the capital stock of Beacon Light. For income
purposes, the company values said Rule 144 Common Shares at $0.05 per share, as
the stock is freely trading on this date at $0.12 per share. Said shares have a
total value of $25,000 for remuneration on this date. Said shares may not be
pledged, margined or sold for a period of two years and is subject to any other
conditions as may be imposed by U.S. Securities laws.
(c) Stock Options - The Corporation shall grant to the Executive a five
year Stock Option for a total of 250,000 Common Shares in the capital stock of
Beacon Light exercisable at $0.15 per share. The granting of these options is
expressly subject to the approval of the board of directors as well as all terms
and conditions as may be imposed by U.S, Securities law.
(d) Remuneration Reviews - The Executive will have annual compensation
reviews shortly after December 1st of each year. These compensation reviews will
result in an increase of no less than 15% of base pay effective on each December
1st thereafter. The review can occur before or after that date but the
compensation must be effective that date.
5. PERQUISITES AND BUSINESS EXPENSES
The Executive shall be reimbursed for all reasonable expenses incurred by
him in connection with the conduct of the Corporation's business upon
presentation of sufficient evidence of such expenditures and provided the same
are authorized expenditures pursuant to policies adopted by the Board of
Directors of the Corporation from time to time.
6. BENEFIT PROGRANS
The Executive will be entitled to participate in all Executive benefit
programs of the Corporation from time to time in effect under the terms and
conditions of such programs, including, but not limited to, pension, share
incentive and other benefit plans, group life insurance, hospitalization and
surgical and major medical coverage, dental insurance, sick leave, including
salary continuation arrangements, vacations and holidays, long-term disability,
and such other fringe benefits as are or may be available from time to time to
other executives of the Corporation.
<PAGE> 151
7. VACATION
The Executive shall be entitled to all usual public holidays and, in
addition, 3 weeks annual vacation during each year of employment hereunder. Such
vacation time shall be utilized by the Executive at mutually reasonably
acceptable times.
8. TERMINATION OF EMPLOYMENT
For the full term of this agreement the Executive cannot be terminated by
the Corporation without cause.
(a) Death - In the event of the death of the Executive during the term
of this Employment Agreement, the Executive's salary will be paid to the
Executive's designated beneficiary, and in the absence of such designation, to
the estate or other legal representatives of the Executive, through the end of
the month in which death occurs, Rights and benefits of the Executive under the
Executive benefit plans and programs of the Corporation, including life
insurance, will be determined in accordance with the terms and conditions of
such plans and programs.
(b) Disability - The Executive's employment shall terminate
automatically upon written notice from the Corporation in the event of the
Executive's absence or inability to render the services required hereunder due
to disability, illness, incapacity or otherwise for an aggregate of one hundred
and eighty days during any 12 month period during the term, In the event of any
such absence or inability, the Executive shall be entitled to receive the
compensation provided for herein for such period, and thereafter the Executive
shall be entitled to receive compensation in accordance with the Corporation's
long-term disability plan, if any, together with such compensation, if any, as
may be determined by the Board of Directors of the Corporation.
(c) Termination by the Corporation for Cause - In the event of a
termination for cause, there will be no continued salary payments by the
Corporation to the Executive and any rights and benefits of the Executive under
the Executive benefit plans and programs of the Corporation will be determined
in accordance with the terms of such plans and programs. For the purposes of
this Sub Section and of the Executive's employment with the Corporation, "cause"
shall mean that:
(i) The Executive has committed a felony or indictable offence or
has improperly enriched himself at the expense of the Corporation or has
committed an act evidencing dishonesty or moral turpitude, including without
limitation an act of theft;
(ii) The Executive, in carrying out his duties hereunder, (A) has
been willfully or grossly negligent, or (B) has committed willful and gross
misconduct or, (C) has failed to comply with clear and reasonable, instructions
or directives from the Board of Directors of the Corporation after having been
informed in writing of a failure to so comply having been given reasonable
opportunity to comply or correct a matter;
(iii) The Executive has breached a material term of this
Employment Agreement and such breach is either not promptly remedied upon notice
or is incapable of remedy;
(iv) The Executive becomes bankrupt or in the event a receiving
order (or any analogous order under any applicable law) is made against the
Executive or in the event the Executive makes any general disposition or
assignment for the benefit of his creditors which materially interferes with his
ability to render services hereunder,
<PAGE> 152
(v) The Executive commits any other act giving the Corporation
cause to terminate the Executive's employment, including, but not limited to
chronic alcoholism or drug addiction, material malfeasance or nonfeasance with
respect to the Executive's duties hereunder.
Prior to any termination of the Executive for cause due to the first only
of any occurrence described in subparagraphs ii), (iii), and (v) above, the
Corporation shall notify the Executive in writing of the particulars of the
occurrence upon which termination would be based and shall in such notice advise
the Executive as to whether, in that Corporation's reasonable opinion, the
default of the Executive occasioned by such occurrence is capable of being cured
or rectified in full without material loss or damage to the Corporation, in
which case the Corporation shall afford the Executive a reasonable period of not
less than five business days in which to cure or rectify such default. In such
event and provided the Executive cures or rectifies such default in full without
material loss or damage to the Corporation, the Executive's employment shall not
be terminated on the basis of such occurrence.
(d) Termination by the Executive - The Executive shall be entitled to
terminate this agreement at any time upon giving the Corporation three (3)
months written notice.
9. NON-COMPETITION
(a) The Executive agrees that during the period of the Executive's
employment with the Corporation and for a period of twelve months from the last
payment of monthly compensation to the Executive by the Corporation, the
Executive shall not engage in or participate in any business activity that
competes, directly in the Global market, with the business of the Corporation,
or that of any parent, subsidiary or affiliate companies, organizations or
entities. For purposes of this Section the business of the Corporation means
that area of telecommunications presently engaged in by the Company and includes
all future activities as may be described in the business plan of the company as
approved by the Board of Directors from time to time.
(b) For the purposes of this Section, the Executive shall be deemed to
"compete, directly or indirectly, with the business of the Corporation or its
parent, subsidiary, or affiliate companies, organizations or entities" if the
Executive is or becomes engaged, otherwise than at the request of the
Corporation, as an officer, director or the Executive of, or is or becomes
associated in a management, employee, ownership, consultancy or agency capacity
with any corporation, partnership or other enterprise or venture whose business
includes the distribution of competing services or products.
(c) It is the desire and intent of the parties that the provisions of
this Section shall be enforceable to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section is adjudicated
unenforceable in any jurisdiction such adjudication shall apply only in that
particular jurisdiction in which such adjudication is made.
10. NON-SOLICITATION
The Executive agrees that for a period of one year following the
termination of the Executive's employment with the Corporation, for any reason
whatsoever, the Executive will not, whether as principal, agent, executive,
employer, director, officer, shareholder or in any other individual or
representative capacity, solicit or attempt to retain in any way whatsoever, any
of the Executives or employees of either of the Corporation or its parent,
subsidiary or affiliate companies, organizations or entities.
<PAGE> 153
11. CONFIDENTIAL INFORMATION
All confidential records, material and information and copies thereof and
any and all trade secrets concerning the business or affairs of the Corporation
or any of its parent, subsidiary, or affiliate companies, organizations or
entities, obtained by the Executive in the course and by the reason of his
employment shall remain the exclusive property of that Corporation. During the
Executive's employment or at any time thereafter, the Executive shall not
divulge the contents of such confidential records or any of such confidential
information or trade secrets to any person other than to the Corporation, or to
the Corporation's qualified Officers or Executives, and the Executive shall not,
following the termination of his employment hereunder, for any reason use the
contents of such confidential records or other confidential information or trade
secrets for any purpose whatsoever.
12. WITHHOLDING
Anything to the contrary notwithstanding, all payments required to be made
by the Corporation hereunder to the Executive or his estate or beneficiaries,
shall be subject to the withholding of such amounts relating to taxes as the
Corporation may reasonably determine, after consultation with the Executive, it
should withhold pursuant to any applicable law or regulation. In lieu of
withholding such amounts, in whole or in part, the Corporation may, in its sole
discretion, accept other provisions for payment of taxes and withholdings as
required by law, provided that the Corporation is satisfied that all
requirements of law affecting the Corporation's responsibilities to withhold
have been complied with.
13. ENTIRE AGREEMENT
This Employment Agreement contains the entire agreement between the parties
hereto with respect to matters herein and supersedes all prior agreements and
understandings, oral or written, between the parties hereto relating to such
matters.
14. ASSIGNMENT
Except as herein expressly provided, the respective rights and obligations
of the Executive and the Corporation under this Employment Agreement shall not
be assignable by either party without the written consent of the other party and
shall enure to the benefit of and be binding upon the Executive and the
Corporation and their permitted successors or assigns, including, in the case of
the Corporation, any other corporation or entity with which such Corporation may
be merged or otherwise combined or which may acquire that Corporation or its
assets in whole or in substantial part, and, in the case of the Executive, his
estate or other legal representatives. Nothing herein expressed or implied is
intended to confer on any person other than the parties hereto any rights,
remedies, obligations or liabilities under or by reason of this Employment
Agreement.
15. APPLICABLE LAW
This Employment Agreement shall be deemed a contract under, and for all
purposes shall be governed by and construed in accordance with, the laws of the
State of Connecticut without regard to the conflict of laws rules thereof. The
Corporation and the Executive hereby irrevocably consent and affirm to the
jurisdiction of the courts of the State of Connecticut with respect to any
dispute or proceeding arising in connection with this Employment Agreement.
<PAGE> 154
16. AMENDMENT OR MODIFICATION: WAIVER
No provision of this Employment Agreement may be amended or waived unless
such amendment or waiver is authorized by the Corporation (including any
authorized officer or committee of the Board of Directors) and is in writing
signed by the Executive and by a duly authorized officer of The Corporation.
Except as otherwise specifically provided in this Employment Agreement, no
waiver by any party hereto of any breach by the other parties of any condition
or provision of this Employment Agreement to be performed by such other party or
parties shall be deemed a waiver of a similar or dissimilar breach, condition or
provision at the same time or at any prior or subsequent time.
17. PROVISIONS SURVIVING TERMINATION
It is expressly agreed that notwithstanding termination of the Executive's
employment with and by the Corporation for any reason or cause or in any
circumstances whatsoever, such termination shall be without prejudice to the
rights and obligations of the Executive and the Corporation, in relation or
arising up to the time up to and including the date of termination; and the
provisions of Sections 9 through 12 inclusive, shall all remain and continue in
full forte and effect.
18. SEVERABILITY
In the event that any provision or portion of this Employment Agreement
shall be determined to be invalid or unenforceable for any reason, the remaining
provisions and portions of this Employment Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
19. COUNTERPARTS
This Employment Agreement may be executed in counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
20. REFERENCE
In the event of the Executive's death or a judicial determination of his
incompetency, reference in this Employment Agreement to the Executive shall be
deemed, where appropriate, to refer to his beneficiary or beneficiaries.
21. CAPTIONS
Captions to the Sections of this Employment Agreement are solely for
convenience and no provision of this Agreement is to be construed by reference
to the captions of that Section.
BEACON LIGHT HOLDING CORPORATION
By: /s/Jerry Gruenbaum
--------------------------------
Jerry Gruenbaum, President
155
EX-10.5
CASIN FACTORY ACQUISITION AGREEMENT
AGREEMENT
This memorandum of understanding made the twenty third of November one thousand
nine hundred and ninety eight.
Between Casin Video Cassette Limited of ninth floor Block A, Man Fung Industrial
Building, 7 Cheung Lee Street, Chai Wan, hereinafter referred to as "the vendor"
of the first part.
And Beacon Light Holding Corporation of 2 Stanford Landing, Suite 100, Stamford,
CT 06902-7649 U.S.A., or their nominee hereinafter referred to as "the
purchaser" of the second part.
Where as;
A. The Vendor is the owner of Casin Magnetic Manufactory, a manufacturing
company situated at the Lucky Industrial Area, Tong Ha Chung Village, Song Gong
Town, Bao An Shenzen, Peoples Republic of China.
B. The purchaser has offered to purchase from the vendor the said
manufacturing company, inclusive of it's licenses to conducted a manufacturing
business in the Peoples Republic of China and it's tenancy agreement to lease
the factory buildings and purchase its fixed assets and inventory, and trade
names and trade marks, the vendor owns in respect of products Casin Magnetic
Manufactory manufactures.
Now it is hereby agreed and declared as follows:
1. The Vendor and the purchaser will enter into a formal agreement covering
the sale by the vendor of Casin Magnetic Manufactory to the purchaser.
2. The said formal agreement will include amongst its provisions, certain
provisions in relation to the following:
A) That the vendor has a Tenancy Agreement to lease the factory premises for
11 more years and that the vendor will warrant he has the right to assign the
said Tenancy Agreement and will agree to assign the Tenancy Agreement to the
Purchaser.
B) That the vendor will agree to sell to the purchaser the fixed assets as
listed in the evaluation report prepared for Beacon Light and inventory of Casin
Magnetic Manufactory that will be fully described in a schedule to the proposed
formal agreement.
C) That the vendor will affect the transfer of all licenses issued by the
Peoples Republic of China in respect of Casin Magnetic Manufactory's right to
conduct a manufacturing and export business on the date of the formal agreement
and will warrant that the said licenses are transferable.
D) That the vendor will agree to sell to the purchaser all of Casin Magnetic
Manufactory's current assets exclusive of receivables for completed deliveries
and services at the date of the proposed formal agreement.
<PAGE> 156
E) That the vendor will agree to sell to the purchaser all running orders of
Casin Magnetic Manufactory in existence at the date of the signing of the
proposed formal agreement and that the vendor will provide the purchaser with
all the necessary assistance to complete the said running orders.
F) That the vendor will agree to sell and transfer to the purchaser any
registration or trademark in respect of products manufactured by Casin Magnetic
Manufactory and the vendor further agrees to change his name to prevent any
conflicts with the said registrations and trademarks.
G) That the vendor will agree to assign to the purchaser any contracts in
respect of Casin Magnetic Manufactory employees and the vendor will warrant that
there are no other contracts in existence in respect of those employees.
H) The vendor will agree to transfer to the purchaser, all such information
inclusive of vendor lists and supplier lists in respect of Casin Magnetic
Manufactory.
I) The vendor will warrant that all items that he propose to sell to the
purchaser are free of any trade creditors other liabilities specific or
unspecified charges or any other encumbrances.
J) The purchaser agrees to pay to the vendor the amount of Hong Kong Dollars
Nine Million Four Hundred Eighty (9,480,000) as consideration of the said sale
and that an amount equal to twenty percent of the sale price will be kept in
escrow for a period of 2 months to discharge any liability that is the
responsibility of the vendor.
SIGNED FOR AND ON BEHALF OF SIGNED FOR AND ON BEHALF OF
CASIN VIDEO CASSETTE LTD. BEACON LIGHT HOLDING CORPORATION
/s/Tom Chin /s/Jerry Gruenbaum, President
- ------------------------- ----------------------------------
CASIN VIDEO CASSETTE LTD BEACON LIGHT HOLDING CORPORATION
/s/Hans Lodders /s/Fukman Yip
157
EX-10.6
WELLUX ACQUISITION AGREEMENT
ACQUISITION AGREEMENT
----------------------
Acquisition Agreement, made this10th day of June, 1999 by and between
BEACON LIGHT HOLDING CORPORATION a Nevada Corporation, of 54 Hazard Avenue,
Suite 270, Enfield, Connecticut (the "Buyer") and CROWN UNION INVESTMENT LIMITED
a Hong Kong Corporation of House 23, DD 192, Lot 423, Kwan Yam Garden, Kwun Yam
Shan, Tze Wan Shan, Kowloon, Hong Kong (the "Sellers").
Whereas Buyer, directly and through one or more subsidiaries, intends to
engage in the import, design and manufacture of adult toys and novelties; and
Whereas Wellux Industries Limited, Enterprise Square, Tower II 9 Sheung
Yuet Road, Suite 1903, Kowloon, Hong Kong, A Hong Kong Corporation (the
"Company"), is engaged in the import, design and manufacture of adult toys and
novelties, which it stocks in its warehouse, and then markets them to its
specialized distribution systems to various wholesalers and retailers; and
Whereas the parties hereto deem it to be in the best interest of each of
them that Buyer purchase 100 percent of the issued and outstanding capital stock
of the Company, and generally succeed to the business of the Company, all
pursuant to such terms, provisions and conditions as the parties hereto shall
agree; and
Whereas the parties have entered into a preliminary Acquisition Agreement
subject to the Buyer's due diligence on March 17, 1999.
Now, therefore, in consideration of the premises and of the mutual promises
and covenants hereinafter set forth, the parties hereto agree further, more and
simultaneously update their agreement made on March 17, 1999 as follows:
1. Purchase and Payment
A. Purchase and Sale of Stock.
a. Buyer agrees to purchase from Seller and Seller agrees to sell,
assign, transfer and deliver to Buyer 100 percent of all the issued and
outstanding stock of the Company all of whom are owned by the Sellers (the
"Stock").
b. The purchase and payment for the Stock by Buyer shall take place at
the time and in the manner hereinafter provided, and the sale, assignment,
transfer and delivery of the Stock by Sellers, shall take place on the Closing
Date at the Closing as those terms are hereinafter defined, subject to the
fulfillment of the conditions hereinafter provided.
<PAGE> 158
B. Purchase Price. The aggregate purchase price of the Stock (the
"Purchase Price"), shall be Four Million (4,000,000) newly issued common shares
of the Buyer. The shares comprising the Purchase Price, shall be transferred to
the Sellers at closing. Each certificate of common share shall bear the
following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY BE RESOLD OR OTHERWISE TRANSFERRED ONLY IF REGISTERED PURSUANT TO THE
PROVISIONS OF THE ACT OR IF COUNSEL FOR THE COMPANY DETERMINES THAT AN EXCEPTION
FOR REGISTRATION IS AVAILABLE.
2. Representation and Warranties of Buyer. Buyer hereby represents and
warrants to the Sellers that:
A. Organization and Qualification. The Buyer (a) is a duly organized and
validly existing corporation under the laws of the State of Nevada, (b) the
execution, delivery and performance of this Agreement by the Buyer has been duly
authorized by all necessary corporate action, (c) this Agreement is a valid and
legally binding obligation of the Buyer enforceable in accordance with the terms
hereof, (d) no governmental authorization, approval, order, license, permit,
franchise or consent and no registration or filing with any governmental
authority is required in connection with the execution, delivery or performance
of this Agreement by the Buyer.
B. Capital Structure. The Buyer (a) is authorized by its charter and
applicable law to issue 45,000,000 shares of common stock having a par value of
$.001, of which as of the date hereof 17,596,422 shares were issued and
outstanding, no shares were issuable and reserved for issuance pursuant to the
Buyer's stock option and purchase plans and 5,000,000 shares of preferred stock
having a par value of $.001, of which as of this date hereof, no shares were
issued and outstanding; (b) All of the outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and non-assessable (c) has
all voting rights vested exclusively in the presently issued and outstanding
capital stock; and (d) has outstanding no bonds, debentures or other similar
evidences of indebtedness.
C. Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Buyer
threatened against or affecting the Buyer, the Common Stock of the Buyer or the
Buyer's officers or directors in their capacity as such.
3. Representation s and Warranties of the Sellers and the Company.
Sellers hereby warrant and represent to Buyer that, as of the date hereof, the
following statements are true and correct:
A. Corporate Status. The Company is (a) duly organized, validly
existing and in good standing under the laws of Hong Kong; (b) has full power to
own all its properties and carry on its business as it is now being conducted;
and (c) is qualified to do business as a foreign corporation in each of the
jurisdictions in which it operates and the character of the properties owned by
the Company or the nature of the business transacted by the Company does not
make qualification necessary in any other jurisdiction or jurisdictions.
B. Authority to Sell. Sellers have full right, power and authority to
sell, transfer and deliver the Business owned by such Seller to Buyer in
accordance with the terms of this Agreement, and otherwise to consummate and
close the transaction provided for in this Agreement in the manner and upon the
terms herein specified.
<PAGE> 159
C. Financial Statements. At or prior to the date of this Agreement,
the Company has delivered to Buyer internal financial statements as of December
31, 1998, and said internal financial statements, including the related notes
and explanatory notes, present fairly the financial position of the Company at
the date thereof and the results of its operations for the periods therein
indicated, in conformity with generally accepted accounting principals applied
on a basis consistent in each case with that of the preceding year.
D. Period Since Most Recent Financials. From the date of the most
recent reviewed internal balance sheet included in the Company's Financials, the
Company has:
a. Not suffered any material adverse change in its financial condition,
assets, liabilities or business.
b. Not affirmatively waived, canceled or compromised any of its rights,
debts or claims of substantial value.
c. Not issued any additional shares of stock, rights or options to
purchase or convert into such stock, or other securities.
d. Not made any distributions to its shareholders, as
shareholders, of any assets, by way of dividends, purchase of shares or
otherwise.
e. Not mortgaged, pledged or granted a lien or encumbrance on any of
its properties or assets, except with respect to equipment purchased by the
Company during such period.
f. Not sold or transferred any of its assets, tangible or intangible,
except motor vehicles and except inventory and other assets sold or disposed of
in the ordinary and usual course of business.
g. Not incurred any extraordinary losses, within the meaning of
generally accepted accounting principles, and/or incurred or become liable for
any obligations or liabilities except current liabilities, within the meaning of
generally accepted accounting principles, incurred in the ordinary and usual
course of business, or made any extraordinary expenditures, within the meaning
of generally accepted accounting principles, other than for the purchase of
motor vehicles and for additions and betterments to existing plant, equipment
and facilities.
h. Not increased the rate of compensation for any of its officers or
directors nor for any executive employees, except as may be in accord with past
practices and in the usual and ordinary course of business of the Company.
i. Not experienced any material adverse effect on its business,
properties and assets as the result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike, embargo, confiscation of vital equipment,
material or inventory, cancellation of contracts by any domestic or foreign
government, or any agency thereof, or customer whose business with seller
represents 5% or more of sellers gross revenue, riot, activities of armed
forces, or acts of God or the public enemy.
j. To the best knowledge of Seller, it not incurred any liabilities,
contingent or otherwise, except those stated in the balance sheet of the Company
as of December 31, 1998.
<PAGE> 160
E. Capital Structure. The Company (a) is authorized by its charter
and applicable law to issue capital stock of the type and having par values as
set forth herein; (b) has no other issued and outstanding shares of its capital
stock whatever; (c) does not have authorized, issued or outstanding any
subscription, option, warrant, conversion or other rights to the issuance or
receipt of any shares of its capital stock; (d) has all voting rights vested
exclusively in the present issued and outstanding capital stock; and (e) has
outstanding no bonds, debentures or other similar evidences of indebtedness
except as specifically disclosed in its balance sheet as of January 31, 1999,
(and related noted thereto).
F. Ownership of Stock. All of the issued and outstanding shares of
capital stock of the Company are owned by Crown Union Investment Ltd. Sellers
own beneficially and of record the number of shares set forth in Schedule A.
Seller holds such ownership free and clear of all liens, claims, debts,
encumbrances and assessments, and any and all restrictions as to sale,
assignment or transferability thereof. Sellers have full right, power and
authority to sell, transfer and deliver all of the business and assets to Buyer
in accordance with the terms of this Agreement, and otherwise to consummate and
close the transaction provided for in this Agreement in the manner and upon the
terms herein specified.
G. Title to Assets. The Company has good and marketable title to all
of its assets, which good and marketable title is free and clear of all
mortgages, pledges, liens, credit agreements, title retention agreements,
security agreements, taxes, claims, debts and other obligations and
encumbrances, (b) the lien, if any, of current taxes not yet due and payable and
(c) such additional encumbrances or imperfections of titles, if any, which are
not substantial in character, amount or extent and which do not materially
detract from the value, or materially interfere with the present or future
intended use, of the property subject thereto or affected thereby, and which do
not otherwise materially impair or affect the business and operations of the
Company.
H. Peaceable Possession of Assets. The ownership and possession of
all of the assets of the Company have been peaceable and undisturbed and the
title thereto has never been disputed or questioned to the knowledge of the
Company; nor does the Company know of any facts by reason of which the
possession or title thereof by the Company might be disturbed or questioned or
by reason of which any claim to its assets might arise or be set up adverse to
the Company.
I. Regulatory Good Standing. The Company has all material rights,
certificates, authorities, permits, licenses, franchises and other
authorizations necessary to and has complied in material respects with all laws
applicable to, the conduct of its business in the manner and in the areas in
which such business is presently being conducted and all such certificates,
authorities, rights, permits, licenses, franchises and authorizations are valid,
in good standing, in full force and effect, under no orders of suspension or
restraints, and subject to no disciplinary, probationary or other orders. To
the best of its knowledge, the Company has engaged in no activity whatever which
would cause or lead to proceedings involving revocation, suspension, restraint,
disciplinary action or any other action whereby any of such certificates,
authorities, rights, permits, licenses, franchises or authorizations, or any
part thereof, might be canceled, terminated, suspended, impaired, lost or
otherwise adversely affected, and no action or proceeding looking to or
contemplating any of the foregoing is pending or to the Company's knowledge
threatened. The foregoing shall not be deemed to constitute a warranty or
<PAGE> 161
representation that the Company has not heretofore or shall not hereafter suffer
to be committed minor and unintentional violations of any governmental
regulations of such nature as not to cause either suspension or revocation of
the Company's operating authority.
J. Litigation. The Company is not a party to any pending or to its
knowledge threatened suit, action, proceeding, prosecution or litigation which
might materially adversely affect the financial condition, business, assets,
properties, certificates, rights, authorities, franchises or authorizations of
the Company, or materially interfere therewith, nor to the knowledge of the
Company is there any threatened or pending governmental investigation involving
the Company or any of its operations, including inquiries, citations or
complaints by any governmental agency, which would materially adversely affect
the financial condition, business, assets or properties of the Company; and
there are no outstanding, existing or pending judgments, orders, decrees,
rulings, directives, stipulations or other mandates of any court or any public
or quasi-public agency, body or official which have been in any way violated as
they relate to or affect the Company or any of the Company's properties,
businesses, operations, affairs or activities.
K. Defaults. There are no material defaults on the part of the
Company under any contract, lease, mortgage, pledge, credit agreement, title
retention agreement, security agreement, lien, encumbrance or any other
commitment, contract, agreement or undertaking to which the Company is a party.
L. Tax Returns. All returns for income taxes, surtaxes, excess profits
taxes, franchise taxes, sales and use taxes, real and personal property taxes
and any and all other taxes to which the Company, or its assets, operations or
income may be subject, due as of the date hereof, have been duly prepared and
filed in good faith and all taxes shown thereon have been paid or are accrued on
the books of the Company.
M. Tax Accruals. All other taxes and other assessments and levies
which the Company is required by law to withhold or to collect have been duly
withheld and collected and have been paid over to the proper governmental
authorities or are held by the Company for such payment and all such withholding
and collections and all other payments unpaid and due in connection therewith as
of January 31, 1999 are duly reflected in the balance sheet of the Company as of
said date.
N. Labor Problems. No labor or labor union problems or difficulties,
strikes, walk-outs, slow downs, job actions, boycotts arbitration,
investigations, litigation or similar proceedings with respect thereto, are
presently existing, suffered, pending or threatened with respect to the Company,
its employees, business operations, assets or properties.
O. Compliance with Law. All of the properties, assets and business
operations of the Company conform in material respects with all applicable
ordinances, regulations, laws and statutes, including but not limited to
building, zoning, safety, highway and other such laws, rules, regulations and
ordinances.
P. Infringements. The Company has never been charged with infringement
or violation of any adversely held patent, trademark, trade name, or copyright,
with claims reading on operations of the Company or on apparatus or methods
employed by the Company in effecting the same, which would materially adversely
affect any operation of the Company, nor is the Company using or in any way
making use of any confidential information or trade secrets, of any former
employer or any present or past employee of the Company except as a result of
the acquisition of the business of such former employer.
<PAGE> 162
Q. Truth of Representation. No representation by the Company made in
this Agreement and no statement made in any certificate or schedule furnished in
connection with the transaction herein contemplated contains or will contain any
knowingly untrue statement of a material fact or knowingly omits or will omit to
state any material fact reasonably necessary to make any such representation or
any such statement not misleading to a prospective purchaser of the Stock.
4. Covenants of the Sellers and the Company. Sellers hereby covenant and
agrees as follows:
A. Inspection of Records. During the period from the date hereof
through the Closing Date as that term is hereinafter defined (the "Contract
Period"), the Buyer shall have the right and opportunity at its own expense to
make such examination and investigation of the Company's business, properties
and affairs as the Buyer may deem reasonably necessary or desirable for all
purposes relating to this Agreement and to that end, throughout the Contract
Period, the Company will allow and grant the Buyer, its officers, counsel,
accountants, auditors and executive employees full, free and continuous access,
during normal business hours and without interference with the conduct of the
Company's business, to all of the premises, properties, contracts, commitments,
leases, books, papers, documents, instruments, books of account, minutes and
other records of the Company and will furnish and provide the Buyer with all
such financial and other statements and all such additional information and
particulars in respect of the business, properties and affairs of the Company as
the Buyer may, from time to time during the Contract Period, reasonably request
or require.
B. Conduct of Business. During the period from the date hereof to the
Closing Date as that term is hereinafter defined, the Company shall:
a. Conduct its business and operations solely in the usual, normal and
ordinary course;
b. Issue no additional shares of stock, options, call or other rights to
purchase such stock, or any other securities of any kind whatever;
c. Make no distributions to its shareholders, as shareholders, of any of its
assets or properties by way of dividends, purchase of shares, redemption or
otherwise.
d. Not transfer to any person, firm or corporation any customers,
customer lists or customer accounts of the Company;
e. Make no increase of any kind in any salary, wages, bonus or compensation
of any officer, employee, representative or agent of the Company or pay any
extra compensation of any kind whatever to any of such persons, except with
respect to such increases in or additions to compensation as may be required to
be paid in accordance with existing firm and binding contracts and commitments
of the Company and except as may be in accordance with past practices and in the
usual and ordinary course of business of the Company;
f. Not sell, transfer or dispose of any Stock.
g. Not sell, transfer or dispose of any of its business, properties or
assets, tangible or intangible, except for a full and fair consideration in the
usual and ordinary course of business;
h. Make no purchases or acquisitions of any real or personal property
nor increase or decrease inventory, except in the usual and ordinary course of
its business;
<PAGE> 163
i. Not subject any of its business, property or assets whatever,
tangible or intangible, to any mortgage, lien, pledge, hypothecation or
encumbrance in any manner except for a full and fair consideration in the usual
and ordinary course of business;
j. Not borrow any money, make any unusual or extraordinary expenditures
or incur or become liable for any obligations or liabilities except current
liabilities in the usual and ordinary course of its business;
k. Not make any loans or advances or extend any credit except in the
usual and ordinary course of its business.
C. Publicity. All notices to third parties other than Sellers and all
other publicity concerning the transactions contemplated by this Agreement shall
be planned and coordinated jointly by Buyer and by the Company.
D. Warranties and Representations. The Company will promptly
to Buyer copies of any and all financial statements of the Company prepared by
or for the Company subsequent to the date hereof, and will promptly furnish to
and advise the Buyer of any and all material information, details, facts and
circumstances concerning the Company's financial condition, or business arising
subsequent to the date of this Agreement by reason of which any changes,
modifications, amendments, additions or deletions from any Schedule annexed
hereto or any warranty, representation, covenant or condition recited herein
would be necessary to render the same true and correct in material respects and
not materially false or misleading, as of the date such information, details,
facts and circumstances are furnished to the Buyer.
5. Conditions Precedent to Closing. All obligations of the Buyer under
this Agreement are subject to the fulfillment of each of the following
conditions, in addition to the fulfillment of any and all other conditions set
forth in this Agreement:
A. Effectiveness of Warranties. Each and every one of the warranties
and representations of Sellers and the Company as hereinbefore set forth in
Paragraph 4 hereof, shall be true at and as of the Closing Date as though such
representations were made at and as of such time.
B. Performance of Covenants. Each and every covenant herein made by
Sellers and the Company, as set forth in Paragraph 4, which are to be performed
at or prior to the Closing Date, shall have been duly performed by such times.
C. Financial Condition. The financial condition and financial
statements of the Company are such that:
a. During the period from the date of the Company's January 31, 1999,
1998 internal financial statement to the Closing Date, there have been no
material adverse changes in the capital stock or long term debt, within the
meaning of general accepted accounting principles, of the Company or any
material adverse change in the financial condition or results of operations of
the Company.
D. Management. Subject to removal by a vote of the majority of the
shareholders in the next election of directors, Hans Lodders will serve as the
Buyer's Chairman of the Board and Managing Director of its Far East Operations;
Jerry Gruenbaum will remain as the Buyer's President and member of the Board;
and Ronald Steenbergen will serve on the Buyer's Board of Directors.
<PAGE> 164
E. Corporate Action. Prior to the Closing Date, the Board of Directors of
the Company shall have duly adopted resolutions to the same effect with respect
to the aforesaid matters.
F. Termination. In the event any of the foregoing conditions shall
not be fulfilled prior to the Closing, unless caused by any action or failure to
act on the part of Buyer, Buyer shall have the right to terminate the Agreement
by notice thereof in writing to the Company, and the parties hereto shall be
restored as far as possible to status quo, whereupon the parties hereto shall
have no further obligations or liabilities hereunder, one against the other,
except for the obligation of Buyer under Section H here of which shall survive a
termination of this Agreement.
6. Indemnification.
A. Buyer shall be indemnified by Sellers and the Company, and the
Sellers and the Company will hold harmless the Buyer from and against any
losses, damages or expenses which may be suffered or incurred by Buyer arising
from or by reason of the inaccuracy of any statement, representation or warranty
of Sellers or the Company made herein or, in any schedule hereto or certificate
delivered in connection herewith, or the failure of Sellers or the Company to
perform any agreement made by them herein. Buyer shall give Seller prior
written notice of any claim, demand, suit or action with respect to which
indemnity may be sought pursuant to this Section. Sellers, in every such case,
shall have the right at his sole expense and cost to participate in contesting
the validity or the amount of any such claim, demand, suit or action. In the
event Buyer suffers loss, damage or expense and is entitled to indemnification
under this Section, the amount of any such loss, damage or expense shall be
assessed against and shall be paid by Sellers. Sellers shall have no liability
under this Section unless a claim for indemnification is made by the Buyer prior
to the Six (6) month anniversary of the Closing. Notwithstanding anything
herein to the contrary, Sellers shall have no liability under this Section for
any loss, damage, expense or amount suffered or incurred by Buyer or the Company
(a) as a result of any election made by the Buyer or the Company subsequent to
the Closing under Section 338 of the Internal Revenue Code of 1954, as amended,
or (b) which is covered by insurance maintained by the Company on the Closing
Date.
B. The Buyer shall indemnify the Company and Sellers and shall hold the
Company and Sellers harmless, on demand, from and against any losses, damages or
expenses which may be suffered or incurred by the Company or Seller arising from
or by reason of the inaccuracy of any statement, representation or warranty of
the Buyer made herein or in any document or instrument delivered by Buyer to
Sellers or the Company in connection with the transactions herein contemplated,
or the failure of Buyer to perform any agreement or covenant made by it herein
or in any document or instrument delivered by Buyer to Sellers or the Company in
connection with the transactions herein contemplated.
7. Closing.
A. Time and Place. The closing under this Agreement (the "Closing") and
all deliveries hereunder shall take place at the office of the Seller on May 17,
1999 or such other date as shall be agreed upon by all the parties ("the
Closing date").
B. Delivery of Documents.
a. At the Closing, the Company will deliver to the Buyer the following
documents:
<PAGE> 165
(i) A written opinion, dated on the Closing Date, of counsel
representing the Company, to the effect that the Company has been duly
incorporated and is on the closing date validly existing as a corporation in
goof standing under the laws of the state of its incorporation; that the Company
is duly qualified or licensed as a foreign corporation in all other states in
which it does business; that the shares of capital stock delivered by Sellers to
Buyer at the Closing have been validly issued and are outstanding, fully paid,
and non-assessable, and constitute all of the issued and outstanding shares of
capital stock of the Company; that such counsel knows of no litigation,
proceeding or investigation pending or threatened against the Company or Sellers
which might result in any material adverse change in the business, properties or
financial condition of the Company or which questions the validity of this
Agreement or of any action taken pursuant to or in connection with the
provisions of this Agreement, other than as represented elsewhere in this
Agreement' and that to the knowledge of such counsel the sale, transfer,
assignment and delivery by Sellers to Buyer of the Stock pursuant to this
Agreement will vest in Buyer all rights, title and interest in and to such Stock
tree and clear of all liens, encumbrances, and equities.
(ii) A written confirmation dated the Closing Date, by the accountant
who reviewed any and all of the financial statements of the Company and who most
recently examined the books and records of the Company.
(iii) A certificate of the Chief Executive Officer and the Chief
Financial Officer of the Company, dated the Closing Date certifying to the best
of his knowledge, in reasonable detail as Buyer may request on and as of said
date, to the fulfillment, as of the Closing Date, of each and every one of the
conditions precedent to the closing set forth in Paragraph 5 hereof, and
specifically setting forth each and every change, amendment, modification,
omission or addition to any provision hereof or schedule annexed hereto or
furnished thereunder, necessary to render each and every one of the provisions
hereof or schedules annexed hereto correct and accurate in material respects and
not materially false or misleading.
(iv) Such additional copies or duplicate originals of the above
described documents and such other documents, undertakings and assurances as
Buyer shall reasonably require, all of which documents, undertakings and
assurances shall be delivered to Buyer sufficiently in advance of the Closing
Date, as Buyer shall reasonably require, so as to permit adequate inspection and
examination thereof, all of which documents, undertakings and assurances shall
be in form satisfactory to counsel to Buyer.
b. At the Closing, Buyer will deliver to each Seller the following:
(i) A written opinion of counsel to Buyer, dated as of the Closing, to
the effect of the representations of Buyer and the Majority Stockholders in
Section 2 hereof.
8. Confidentiality. All information and documentation provided or to be
provided by the Company or Sellers to Buyer in connection with this Agreement
and the transactions contemplated hereby has been and shall be provided in the
strictest confidence. Pending the Closing, Buyer covenants and agrees not to
use any of such information or documentation in or for the benefit of any
business engaged in directly or indirectly by Buyer and not to furnish or
disclose any of such information or documentation to any person or company. If
the transactions contemplated by this Agreement are not consummated, Buyer
covenants and agrees to return all such information and documentation to the
Company and not retain any copies thereof, and Buyer further covenants and
agrees to maintain the confidentiality of such information and documentation and
<PAGE> 166
to neither use any of it in or for the benefit of any business engaged in
directly or indirectly by the Buyer nor furnish or disclose any of it to any
person or company.
9. General Provisions.
A. Survival of Representations, Warranties and Covenants. Unless
otherwise expressly provided herein, the representations, warranties, covenants,
indemnities and other agreements herein contained shall be deemed to be
continuing and shall survive the consummation of the transactions contemplated
by this Agreement.
B. Diligence. The parties hereto agree that each shall with
reasonable diligence proceed to take all action, which may be reasonably
required to consummate the transaction herein contemplated.
C. Waivers. Each party hereto may:
a. Extend the time for performance of any of the obligations of the
other party;
b. Waive in writing any inaccuracies in representations and warranties
made to it contained in this Agreement or any schedule hereto or any certificate
or certificates delivered by any of the other parties pursuant to this
Agreement; and
c. Waive in writing the failure of performance of any of the
agreements, covenants, obligations or conditions of the other parties herein set
forth, or alternatively terminate this Agreement for such failure.
D. Non-Waiver. The waiver by any party hereto of any breach, default,
inaccuracy or failure by another party with respect to any provision in this
Agreement or any schedule hereto shall not operate or be construed as a waiver
of any other provision thereof or of any subsequent breach thereof.
E. Further Assurances. Each party hereto agrees to execute such
further documents or instruments, requested by the other party, as may be
reasonably necessary or desirable to effect the purposes of this Agreement and
to carry out its provisions, at the expense of the party requesting the same.
F. Entire Agreement. This Agreement constitutes a complete statement
of all the arrangements, understandings and agreements between the parties, and
all prior memoranda and oral understandings with respect thereto are merged in
this Agreement. There are no representations, warranties, covenants, conditions
or other agreements among the parties except as herein specifically set forth,
and none of the parties hereto shall rely on any statement by or on behalf of
the other parties which is not contained in this Agreement.
G. Governing Law. Irrespective of the place of execution or
performance of this Agreement, it shall be governed by and construed in
accordance with the laws of State of New York applicable to contracts made and
to be performed in the State of New York, and cannot be changed, modified,
amended or terminated except in writing, signed by the parties hereto.
<PAGE> 167
H. Benefit and Assignability. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns, provided, however, that this Agreement cannot be
assigned by any party except by or with the written consent of the others.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or to give any person, firm or corporation other than the parties hereto
and their respective legal representatives, successors and assigns any rights or
benefits under or by reason of this Agreement.
I. Approval of Counsel. The form of all legal proceedings and all of the
papers and documents used or delivered thereunder, shall be subject to the
approval of counsels to Buyer and Sellers.
J. Costs. The Buyer shall bear its own costs and expenses of the
transaction. The costs and expenses of Sellers in connection with this
Agreement and the transactions contemplated hereby shall be borne and paid by
Sellers.
K. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
L. Notices. Any notices and other communications under this Agreement
shall be in writing and shall be considered given if delivered personally or
mailed by certified mail to the party, for whom such notice is intended, at the
address indicated at the outset hereof (or at such other address as such party
may specify by notice to the other parties hereto).
M. Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
N. Further Action. Any further action required or permitted to be
taken under this Agreement, including giving notices, executing documents,
waiving conditions, and agreeing to amendments or modifications, may be taken on
behalf of a party by its Board of Directors, its President or any other person
designated by its Board of Directors, and when so taken shall be deemed the
action of such party.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
Agreement the day and year first above written.
BUYER
BEACON LIGHT HOLDING CORPORATION
By: /s/Jerry Gruenbaum___
------------------------
Jerry Gruenbaum, President
SELLER
CROWN UNION INVESTMENT LIMITED
By:/S/Hans Lodders
----------------
Hans Lodders
By:/s/Ronald Steenbergen
----------------------
Ronald Steenbergen
168
EX-10.7
KLICK ACQUISITION AGREEMENT
ACQUISITION AGREEMENT
----------------------
Acquisition Agreement, made this 22ND day of September, 1999 by and between
BEACON LIGHT HOLDING CORPORATION a Nevada Corporation, of 100 Pearl Street -
14th Floor, Hartford, Connecticut (the "Buyer") and DRILFORD LTD. of Hong Kong,
58-63 Gloucester Road, Chekiang First Bank Bldg., Hong Kong., MA YUK KING., of
House No. 23, DD192, Kwan Yam Garden, Tso Tui Ha, Kwan Yam Shan, Tse Wan Shan,
Kowloon and KG GROUP LTD. a British Virgin Island Corporation of Akara Bldg., 24
Decastro St., Wickhams Cay I, Roadtown, Tortola, British Virgin Islands (the
"Sellers").
Whereas Buyer, directly and through one or more subsidiaries, intends to
engage in the import, design and manufacture of household products; and
Whereas Klick Ltd., Suite 505-7, Enterprise Square, Tower II, 9 Sheung Yuet
Road, Kowloon Bay, Hong Kong, A Hong Kong Corporation (the "Company"), is
engaged in the import, design and manufacture of household products, and then
markets them to its specialized distribution systems to various wholesalers and
retailers; and
Whereas the parties hereto deem it to be in the best interest of each of
them that Buyer purchase 49 percent of the issued and outstanding capital stock
of the Company, 15 percent from DRILFORD LTD., 30 percent from MA YUK KING, and
4 percent from KB GROUP LTD. with an option from KB GROUP LTD. who owns the
remaining 51 percent, for one year, to purchase said remaining 51 percent and
generally succeed to the business of the Company, all pursuant to such terms,
provisions and conditions as the parties hereto shall agree; and
Whereas the parties have entered into a preliminary Acquisition Agreement
subject to the Buyer's due diligence on March 17, 1999.
Now, therefore, in consideration of the premises and of the mutual promises
and covenants hereinafter set forth, the parties hereto agree as follows:
1. Purchase and Payment
A. Purchase and Sale of Stock.
a. Buyer agrees to purchase from Seller and Seller agrees to sell,
assign, transfer and deliver to Buyer 49 percent of all the issued and
outstanding stock of the Company all of whom are owned by the Sellers (the
"Stock").
b. The purchase and payment for the Stock by Buyer shall take place at
the time and in the manner hereinafter provided, and the sale, assignment,
transfer and delivery of the Stock by Sellers, shall take place on the Closing
Date at the Closing as those terms are hereinafter defined, subject to the
fulfillment of the conditions hereinafter provided.
<PAGE> 169
c. Purchase Price. The aggregate purchase price of the Stock (the
"Purchase Price"), shall be Two Million Four Hundred Fifty Thousand (2,450,000)
newly issued common shares of the Buyer which will rank pari passu in all
respect with all other shares except those mentioned in 1C, and in particular,
in full for all dividends and other distribution thereafter declared, made or
paid on the shares. The shares comprising the Purchase Price, shall be
transferred to the Sellers at closing.
B. Granting of Option.
a. KB GROUP LTD. as the owner of all the remaining 51 percent of the
issued and outstanding stock. Of the Company (the "Remaining Stock"), hereby
grants to the Buyer the right to acquire said Remaining Shares for one year from
the Closing Date.
b. Conditions. The exercise of the Option to Purchase the Remaining
Stock is subject to:
1. The Buyer obtaining substitute trade facilities for the Company
currently provided by KB GROUP LTD and/or its associates.
2. Release all guarantees from KB GROUP LTD, its directors and/or
associates.
3. Repay all outstanding loans/debts due to KB GROUP LTD. and/or its
associates.
4. The Buyer continues to be listed on any stock exchange in the United
States.
c. Purchase Price. The aggregate purchase price of the Remaining Stock
(the "Remaining Purchase Price") shall be Two Million Five Hundred Fifty
Thousand (2,550,000) newly issued common shares of the Buyer.
C. Restrictive Legend.
Each certificate of common share shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY BE RESOLD OR OTHERWISE TRANSFERRED ONLY IF REGISTERED PURSUANT TO THE
PROVISIONS OF THE ACT OR IF COUNSEL FOR THE COMPANY DETERMINES THAT AN EXCEPTION
FOR REGISTRATION IS AVAILABLE.
a. The issued common shares can be registered after Twelve months from the
closing date. The buyer will not oppose such registration by the legal owner of
these shares when at that time such registration does not contravene the
USA Security laws and regulations.
2. Representation and Warranties of Buyer. Buyer hereby represents and
warrants to the Sellers that:
A. Organization and Qualification. The Buyer (a) is a duly
organized and validly existing corporation under the laws of the State of
Nevada, (b) the execution, delivery and performance of this Agreement by the
Buyer has been duly authorized by all necessary corporate action, (c) this
Agreement is a valid and legally binding obligation of the Buyer enforceable in
accordance with the terms hereof, (d) no governmental authorization, approval,
order, license, permit, franchise or consent and no registration or filing with
any governmental authority is required in connection with the execution,
delivery or performance of this Agreement by the Buyer.
<PAGE> 170
B. Capital Structure. The Buyer (a) is authorized by its charter
and applicable law to issue 45,000,000 shares of common stock having a par value
of $.001, of which as of the date hereof 21,496,422 shares were issued and
outstanding, no shares were issuable and reserved for issuance pursuant to the
Buyer's stock option and purchase plans and 5,000,000 shares of preferred stock
having a par value of $.001, of which as of this date hereof, no shares were
issued and outstanding; (b) All of the outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and non-assessable (c) has
all voting rights vested exclusively in the presently issued and outstanding
capital stock; and (d) has outstanding no bonds, debentures or other similar
evidences of indebtedness.
C. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Buyer
threatened against or affecting the Buyer, the Common Stock of the Buyer or the
Buyer's officers or directors in their capacity as such.
3. Representations and Warranties of the Sellers and the Company.
Sellers hereby warrant and represent to Buyer that, as of the date hereof, the
following statements are true and correct:
A. Corporate Status. The Company is (a) duly organized, validly
existing and in good standing under the laws of Hong Kong; (b) has full power to
own all its properties and carry on its business as it is now being conducted;
and (c) is qualified to do business as a foreign corporation in each of the
jurisdictions in which it operates and the character of the properties owned by
the Company or the nature of the business transacted by the Company does not
make qualification necessary in any other jurisdiction or jurisdictions.
B. Authority to Sell. Sellers have full right, power and authority to
sell, transfer and deliver the Business owned by such Seller to Buyer in
accordance with the terms of this Agreement, and otherwise to consummate and
close the transaction provided for in this Agreement in the manner and upon the
terms herein specified.
C. Financial Statements. At or prior to the date of this Agreement,
the Company has delivered to Buyer audited financial statements as of March 31,
1999, and said audited financial statements, including the related notes and
explanatory notes, present fairly the financial position of the Company at the
date thereof and the results of its operations for the periods therein
indicated, in conformity with generally accepted accounting principals applied
on a consistent basis.
D. Period Since Most Recent Financials. From the date of the most
recent reviewed internal balance sheet included in the Company's Financials, the
Company has:
a. Not suffered any material adverse change in its financial condition,
assets, liabilities or business.
b. Not affirmatively waived, canceled or compromised any of its rights,
debts or claims of substantial value.
c. Not issued any additional shares of stock, rights or options to
purchase or convert into such stock, or other securities.
d. Not made any distributions to its shareholders, as
shareholders, of any assets, by way of dividends, purchase of shares or
otherwise.
<PAGE> 171
e. Not mortgaged, pledged or granted a lien or encumbrance on any of
its properties or assets, except with respect to equipment purchased by the
Company during such period.
f. Not sold or transferred any of its assets, tangible or intangible,
except motor vehicles and except inventory and other assets sold or disposed of
in the ordinary and usual course of business.
g. Not incurred any extraordinary losses, within the meaning of
generally accepted accounting principles, and/or incurred or become liable for
any obligations or liabilities except current liabilities, within the meaning of
generally accepted accounting principles, incurred in the ordinary and usual
course of business, or made any extraordinary expenditures, within the meaning
of generally accepted accounting principles, other than for the purchase of
motor vehicles and for additions and betterments to existing plant, equipment
and facilities.
h. Not increased the rate of compensation for any of its officers or
directors nor for any executive employees, except as may be in accord with past
practices and in the usual and ordinary course of business of the Company.
i. Not experienced any material adverse effect on its business,
properties and assets as the result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike, embargo, confiscation of vital equipment,
material or inventory, cancellation of contracts by any domestic or foreign
government, or any agency thereof, or customer whose business with seller
represents 5% or more of sellers gross revenue, riot, activities of armed
forces, or acts of God or the public enemy.
j. To the best knowledge of Seller, it not incurred any liabilities,
contingent or otherwise, except those stated in the balance sheet of the Company
as of March 31, 1999.
E. Capital Structure. The Company (a) is authorized by its charter
and applicable law to issue capital stock of the type and having par values as
set forth herein; (b) has no other issued and outstanding shares of its capital
stock whatever; (c) does not have authorized, issued or outstanding any
subscription, option, warrant, conversion or other rights to the issuance or
receipt of any shares of its capital stock; (d) has all voting rights vested
exclusively in the present issued and outstanding capital stock; and (e) has
outstanding no bonds, debentures or other similar evidences of indebtedness
except as specifically disclosed in its balance sheet as of March 31, 1999, (and
related noted thereto).
F. Ownership of Stock. All of the issued and outstanding shares of
capital stock of the Company are owned by Crown Union Investment Ltd. Sellers
own beneficially and of record the number of shares set forth in Schedule A.
Seller holds such ownership free and clear of all liens, claims, debts,
encumbrances and assessments, and any and all restrictions as to sale,
assignment or transferability thereof. Sellers have full right, power and
authority to sell, transfer and deliver all of the business and assets to Buyer
in accordance with the terms of this Agreement, and otherwise to consummate and
close the transaction provided for in this Agreement in the manner and upon the
terms herein specified.
G. Title to Assets. The Company has good and marketable title to all
of its assets, which good and marketable title is free and clear of all
mortgages, pledges, liens, credit agreements, title retention agreements,
security agreements, taxes, claims, debts and other obligations and
<PAGE> 172
encumbrances, (b) the lien, if any, of current taxes not yet due and payable and
(c) such additional encumbrances or imperfections of titles, if any, which are
not substantial in character, amount or extent and which do not materially
detract from the value, or materially interfere with the present or future
intended use, of the property subject thereto or affected thereby, and which do
not otherwise materially impair or affect the business and operations of the
Company.
H. Peaceable Possession of Assets. The ownership and possession of
all of the assets of the Company have been peaceable and undisturbed and the
title thereto has never been disputed or questioned to the knowledge of the
Company; nor does the Company know of any facts by reason of which the
possession or title thereof by the Company might be disturbed or questioned or
by reason of which any claim to its assets might arise or be set up adverse to
the Company.
I. Regulatory Good Standing. The Company has all material rights,
certificates, authorities, permits, licenses, franchises and other
authorizations necessary to and has complied in material respects with all laws
applicable to, the conduct of its business in the manner and in the areas in
which such business is presently being conducted and all such certificates,
authorities, rights, permits, licenses, franchises and authorizations are valid,
in good standing, in full force and effect, under no orders of suspension or
restraints, and subject to no disciplinary, probationary or other orders. To
the best of its knowledge, the Company has engaged in no activity whatever which
would cause or lead to proceedings involving revocation, suspension, restraint,
disciplinary action or any other action whereby any of such certificates,
authorities, rights, permits, licenses, franchises or authorizations, or any
part thereof, might be canceled, terminated, suspended, impaired, lost or
otherwise adversely affected, and no action or proceeding looking to or
contemplating any of the foregoing is pending or to the Company's knowledge
threatened. The foregoing shall not be deemed to constitute a warranty or
representation that the Company has not heretofore or shall not hereafter suffer
to be committed minor and unintentional violations of any governmental
regulations of such nature as not to cause either suspension or revocation of
the Company's operating authority.
J. Litigation. The Company is not a party to any pending or to its
knowledge threatened suit, action, proceeding, prosecution or litigation which
might materially adversely affect the financial condition, business, assets,
properties, certificates, rights, authorities, franchises or authorizations of
the Company, or materially interfere therewith, nor to the knowledge of the
Company is there any threatened or pending governmental investigation involving
the Company or any of its operations, including inquiries, citations or
complaints by any governmental agency, which would materially adversely affect
the financial condition, business, assets or properties of the Company; and
there are no outstanding, existing or pending judgments, orders, decrees,
rulings, directives, stipulations or other mandates of any court or any public
or quasi-public agency, body or official which have been in any way violated as
they relate to or affect the Company or any of the Company's properties,
businesses, operations, affairs or activities.
K. Defaults. There are no material defaults on the part of the
Company under any contract, lease, mortgage, pledge, credit agreement, title
retention agreement, security agreement, lien, encumbrance or any other
commitment, contract, agreement or undertaking to which the Company is a party.
<PAGE> 173
L. Tax Returns. All returns for income taxes, surtaxes, excess profits
taxes, franchise taxes, sales and use taxes, real and personal property taxes
and any and all other taxes to which the Company, or its assets, operations or
income may be subject, due as of the date hereof, have been duly prepared and
filed in good faith and all taxes shown thereon have been paid or are accrued on
the books of the Company.
M. Tax Accruals. All other taxes and other assessments and levies
which the Company is required by law to withhold or to collect have been duly
withheld and collected and have been paid over to the proper governmental
authorities or are held by the Company for such payment and all such withholding
and collections and all other payments unpaid and due in connection therewith as
of January 31, 1999 are duly reflected in the balance sheet of the Company as of
said date.
N. Labor Problems. No labor or labor union problems or difficulties,
strikes, walk-outs, slow downs, job actions, boycotts, arbitration,
investigations, litigation or similar proceedings with respect thereto, are
presently existing, suffered, pending or threatened with respect to the Company,
its employees, business operations, assets or properties.
O. Compliance with Law. All of the properties, assets and business
operations of the Company conform in material respects with all applicable
ordinances, regulations, laws and statutes, including but not limited to
building, zoning, safety, highway and other such laws, rules, regulations and
ordinances.
P. Infringements. The Company has never been charged with infringement
or violation of any adversely held patent, trademark, trade name, or copyright,
with claims reading on operations of the Company or on apparatus or methods
employed by the Company in effecting the same, which would materially adversely
affect any operation of the Company, nor is the Company using or in any way
making use of any confidential information or trade secrets, of any former
employer or any present or past employee of the Company except as a result of
the acquisition of the business of such former employer.
Q. Truth of Representation. No representation by the Company made in
this Agreement and no statement made in any certificate or schedule furnished in
connection with the transaction herein contemplated contains or will contain any
knowingly untrue statement of a material fact or knowingly omits or will omit to
state any material fact reasonably necessary to make any such representation or
any such statement not misleading to a prospective purchaser of the Stock.
4. Covenants of the Sellers and the Company. Sellers hereby covenant and
agrees as follows:
A. Inspection of Records. During the period from the date hereof
through the Closing Date as that term is hereinafter defined (the "Contract
Period"), the Buyer shall have the right and opportunity at its own expense to
make such examination and investigation of the Company's business, properties
and affairs as the Buyer may deem reasonably necessary or desirable for all
purposes relating to this Agreement and to that end, throughout the Contract
Period, the Company will allow and grant the Buyer, its officers, counsel,
accountants, auditors and executive employees full, free and continuous access,
during normal business hours and without interference with the conduct of the
Company's business, to all of the premises, properties, contracts, commitments,
leases, books, papers, documents, instruments, books of account, minutes and
other records of the Company and will furnish and provide the Buyer with all
<PAGE> 174
such financial and other statements and all such additional information and
particulars in respect of the business, properties and affairs of the Company as
the Buyer may, from time to time during the Contract Period, reasonably request
or require.
B. Conduct of Business. During the period from the date hereof to the
Closing Date as that term is hereinafter defined, the Company shall:
a. Conduct its business and operations solely in the usual, normal
and ordinary course;
b. Issue no additional shares of stock, options, call or other
rights to purchase such stock, or any other securities of any kind whatever;
c. Make no distributions to its shareholders, as shareholders, of
any of its assets or properties by way of dividends, purchase of shares,
redemption or otherwise.
d. Not transfer to any person, firm or corporation any customers,
customer lists or customer accounts of the Company;
e. Make no increase of any kind in any salary, wages, bonus or
compensation of any officer, employee, representative or agent of the Company or
pay any extra compensation of any kind whatever to any of such persons, except
with respect to such increases in or additions to compensation as may be
required to be paid in accordance with existing firm and binding contracts and
commitments of the Company and except as may be in accordance with past
practices and in the usual and ordinary course of business of the Company;
f. Not sell, transfer or dispose of any Stock except to the companies
under the control of KB GROUP, LTD.
g. Not sell, transfer or dispose of any of its business, properties or
assets, tangible or intangible, except for a full and fair consideration in the
usual and ordinary course of business;
h. Make no purchases or acquisitions of any real or personal property
nor increase or decrease inventory, except in the usual and ordinary course of
its business;
i. Not subject any of its business, property or assets whatever,
tangible or intangible, to any mortgage, lien, pledge, hypothecation or
encumbrance in any manner except for a full and fair consideration in the usual
and ordinary course of business;
j. Not borrow any money, make any unusual or extraordinary expenditures
or incur or become liable for any obligations or liabilities except current
liabilities in the usual and ordinary course of its business;
k. Not make any loans or advances or extend any credit except in the
usual and ordinary course of its business.
C. Publicity. All notices to third parties other than Sellers and all
other publicity concerning the transactions contemplated by this Agreement shall
be planned and coordinated jointly by Buyer and by the Company.
<PAGE> 175
D. Warranties and Representations. The Company will promptly furnish
to Buyer copies of any and all financial statements of the Company prepared by
or for the Company subsequent to the date hereof, and will promptly furnish to
and advise the Buyer of any and all material information, details, facts and
circumstances concerning the Company's financial condition, or business arising
subsequent to the date of this Agreement by reason of which any changes,
modifications, amendments, additions or deletions from any Schedule annexed
hereto or any warranty, representation, covenant or condition recited herein
would be necessary to render the same true and correct in material respects and
not materially false or misleading, as of the date such information, details,
facts and circumstances are furnished to the Buyer.
5. Conditions Precedent to Closing. All obligations of the Buyer under
this Agreement are subject to the fulfillment of each of the following
conditions, in addition to the fulfillment of any and all other conditions set
forth in this Agreement:
A. Effectiveness of Warranties. Each and every one of the warranties
and representations of Sellers and the Company as hereinbefore set forth in
Paragraph 4 hereof, shall be true at and as of the Closing Date as though such
representations were made at and as of such time.
B. Performance of Covenants. Each and every covenant herein made by
Sellers and the Company, as set forth in Paragraph 4, which are to be performed
at or prior to the Closing Date, shall have been duly performed by such times.
C. Financial Condition. The financial condition and financial
statements of the Company are such that:
a. During the period from the date of the Company's March 31, 1999
audited financial statement to the Closing Date, there have been no material
adverse changes in the capital stock or long term debt, within the meaning of
general accepted accounting principles, of the Company or any material adverse
change in the financial condition or results of operations of the Company.
D. Corporate Action. Prior to the Closing Date, the Board of Directors
of the Company shall have duly adopted resolutions to the same effect with
respect to the aforesaid matters.
E. Termination. In the event any of the foregoing conditions shall
not be fulfilled prior to the Closing, unless caused by any action or failure to
act on the part of Buyer, Buyer shall have the right to terminate the Agreement
by notice thereof in writing to the Company, and the parties hereto shall be
restored as far as possible to status quo, whereupon the parties hereto shall
have no further obligations or liabilities hereunder, one against the other,
except for the obligation of Buyer under Section H here of which shall survive a
termination of this Agreement.
6. Indemnification.
A. Buyer shall be indemnified by Sellers and the Company, and the
Sellers and the Company will hold harmless the Buyer from and against any
losses, damages or expenses which may be suffered or incurred by Buyer arising
from or by reason of the inaccuracy of any statement, representation or warranty
of Sellers or the Company made herein or, in any schedule hereto or certificate
delivered in connection herewith, or the failure of Sellers or the Company to
perform any agreement made by them herein. Buyer shall give Seller prior
written notice of any claim, demand, suit or action with respect to which
indemnity may be sought pursuant to this Section. Sellers, in every such case,
<PAGE> 176
shall have the right at his sole expense and cost to participate in contesting
the validity or the amount of any such claim, demand, suit or action. In the
event Buyer suffers loss, damage or expense and is entitled to indemnification
under this Section, the amount of any such loss, damage or expense shall be
assessed against and shall be paid by Sellers. Sellers shall have no liability
under this Section unless a claim for indemnification is made by the Buyer prior
to the Six (6) month anniversary of the Closing. Notwithstanding anything
herein to the contrary, Sellers shall have no liability under this Section for
any loss, damage, expense or amount suffered or incurred by Buyer or the Company
(a) as a result of any election made by the Buyer or the Company subsequent to
the Closing under Section 338 of the Internal Revenue Code of 1954, as amended,
or (b) which is covered by insurance maintained by the Company on the Closing
Date.
B. The Buyer shall indemnify the Company and Sellers and shall hold the
Company and Sellers harmless, on demand, from and against any losses, damages or
expenses which may be suffered or incurred by the Company or Seller arising from
or by reason of the inaccuracy of any statement, representation or warranty of
the Buyer made herein or in any document or instrument delivered by Buyer to
Sellers or the Company in connection with the transactions herein contemplated,
or the failure of Buyer to perform any agreement or covenant made by it herein
or in any document or instrument delivered by Buyer to Sellers or the Company in
connection with the transactions herein contemplated.
7. Closing.
A. Time and Place. The closing under this Agreement (the "Closing")
and all deliveries hereunder shall take place at the office of the Seller on
September 22, 1999 or such other date as shall be agreed upon by all the parties
("the Closing date").
B. Delivery of Documents.
a. At the Closing, the Company will deliver to the Buyer the following
documents:
(i) A written opinion, dated on the Closing Date, of counsel
representing the Company, to the effect that the Company has been duly
incorporated and is on the closing date validly existing as a corporation in
goof standing under the laws of the state of its incorporation; that the Company
is duly qualified or licensed as a foreign corporation in all other states in
which it does business; that the shares of capital stock delivered by Sellers to
Buyer at the Closing have been validly issued and are outstanding, fully paid,
and non-assessable, and constitute all of the issued and outstanding shares of
capital stock of the Company; that such counsel knows of no litigation,
proceeding or investigation pending or threatened against the Company or Sellers
which might result in any material adverse change in the business, properties or
financial condition of the Company or which questions the validity of this
Agreement or of any action taken pursuant to or in connection with the
provisions of this Agreement, other than as represented elsewhere in this
Agreement' and that to the knowledge of such counsel the sale, transfer,
assignment and delivery by Sellers to Buyer of the Stock pursuant to this
Agreement will vest in Buyer all rights, title and interest in and to such Stock
tree and clear of all liens, encumbrances, and equities.
(ii) A written confirmation dated the Closing Date, by the accountant
who reviewed any and all of the financial statements of the Company and who most
recently examined the books and records of the Company.
<PAGE> 177
(iii) A certificate of the Chief Executive Officer and the Chief
Financial Officer of the Company, dated the Closing Date certifying to the best
of his knowledge, in reasonable detail as Buyer may request on and as of said
date, to the fulfillment, as of the Closing Date, of each and every one of the
conditions precedent to the closing set forth in Paragraph 5 hereof, and
specifically setting forth each and every change, amendment, modification,
omission or addition to any provision hereof or schedule annexed hereto or
furnished thereunder, necessary to render each and every one of the provisions
hereof or schedules annexed hereto correct and accurate in material respects and
not materially false or misleading.
(iv) Such additional copies or duplicate originals of the above
described documents and such other documents, undertakings and assurances as
Buyer shall reasonably require, all of which documents, undertakings and
assurances shall be delivered to Buyer sufficiently in advance of the Closing
Date, as Buyer shall reasonably require, so as to permit adequate inspection and
examination thereof, all of which documents, undertakings and assurances shall
be in form satisfactory to counsel to Buyer.
b. At the Closing, Buyer will deliver to each Seller the following:
(i) A written opinion of counsel to Buyer, dated as of the Closing, to
the effect of the representations of Buyer and the Majority Stockholders in
Section 2 hereof.
8. Confidentiality. All information and documentation provided or to be
provided by the Company or Sellers to Buyer in connection with this Agreement
and the transactions contemplated hereby has been and shall be provided in the
strictest confidence. Pending the Closing, Buyer covenants and agrees not to
use any of such information or documentation in or for the benefit of any
business engaged in directly or indirectly by Buyer and not to furnish or
disclose any of such information or documentation to any person or company. If
the transactions contemplated by this Agreement are not consummated, Buyer
covenants and agrees to return all such information and documentation to the
Company and not retain any copies thereof, and Buyer further covenants and
agrees to maintain the confidentiality of such information and documentation and
to neither use any of it in or for the benefit of any business engaged in
directly or indirectly by the Buyer nor furnish or disclose any of it to any
person or company.
9. General Provisions.
A. Survival of Representations, Warranties and Covenants. Unless
otherwise expressly provided herein, the representations, warranties, covenants,
indemnities and other agreements herein contained shall be deemed to be
continuing and shall survive the consummation of the transactions contemplated
by this Agreement.
B. Diligence. The parties hereto agree that each shall with
reasonable diligence proceed to take all action, which may be reasonably
required to consummate the transaction herein contemplated.
C. Waivers. Each party hereto may:
a. Extend the time for performance of any of the obligations of the
other party;
<PAGE> 178
b. Waive in writing any inaccuracies in representations and warranties
made to it contained in this Agreement or any schedule hereto or any certificate
or certificates delivered by any of the other parties pursuant to this
Agreement; and
c. Waive in writing the failure of performance of any of the
agreements, covenants, obligations or conditions of the other parties herein set
forth, or alternatively terminate this Agreement for such failure.
D. Non-Waiver. The waiver by any party hereto of any breach, default,
inaccuracy or failure by another party with respect to any provision in this
Agreement or any schedule hereto shall not operate or be construed as a waiver
of any other provision thereof or of any subsequent breach thereof.
E. Further Assurances. Each party hereto agrees to execute such
further documents or instruments, requested by the other party, as may be
reasonably necessary or desirable to effect the purposes of this Agreement and
to carry out its provisions, at the expense of the party requesting the same.
F. Entire Agreement. This Agreement constitutes a complete statement
of all the arrangements, understandings and agreements between the parties, and
all prior memoranda and oral understandings with respect thereto are merged in
this Agreement. There are no representations, warranties, covenants, conditions
or other agreements among the parties except as herein specifically set forth,
and none of the parties hereto shall rely on any statement by or on behalf of
the other parties which is not contained in this Agreement.
G. Governing Law. Irrespective of the place of execution or
performance of this Agreement, it shall be governed by and construed in
accordance with the laws of State of New York applicable to contracts made and
to be performed in the State of New York, and cannot be changed, modified,
amended or terminated except in writing, signed by the parties hereto.
H. Benefit and Assignability. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns, provided, however, that this Agreement cannot be
assigned by any party except by or with the written consent of the others.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or to give any person, firm or corporation other than the parties hereto
and their respective legal representatives, successors and assigns any rights or
benefits under or by reason of this Agreement.
I. Approval of Counsel. The form of all legal proceedings and all of
the papers and documents used or delivered thereunder, shall be subject to the
approval of counsels to Buyer and Sellers.
J. Costs. The Buyer shall bear its own costs and expenses of the
transaction. The costs and expenses of Sellers in connection with this
Agreement and the transactions contemplated hereby shall be borne and paid by
Sellers.
K. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
L. Notices. Any notices and other communications under this Agreement
shall be in writing and shall be considered given if delivered personally or
mailed by certified mail to the party, for whom such notice is intended, at the
address indicated at the outset hereof (or at such other address as such party
may specify by notice to the other parties hereto).
<PAGE> 179
M. Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
N. Further Action. Any further action required or permitted to be
taken under this Agreement, including giving notices, executing documents,
waiving conditions, and agreeing to amendments or modifications, may be taken on
behalf of a party by its Board of Directors, its President or any other person
designated by its Board of Directors, and when so taken shall be deemed the
action of such party.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
Agreement the day and year first above written.
BUYER
- -----
BEACON LIGHT HOLDING CORPORATION
By: /s/Jerry Gruenbaum___
------------------------
Jerry Gruenbaum, President
SELLER
- ------
DRILFORD LTD.
By:/S/Hans Lodders
----------------
Hans Lodders, Director
By:/s/Ma Yuk King
----------------
Ma Yuk King, individually
KB GROUP LTD.
By:/s/S. Khemlani
---------------
S. Khemlani, Director
180
EX-10.8
HONGTEX HONG KONG LETTER OF INTENT
54 Hazard Avenue, Suite 270
Enfield, Connecticut 06082
Phone/Fax (860) 763-4222
Beacon Light Holding Corporation
July 16, 1999
Mr. Wong, President
Hongtex Hong Kong
Hong Kong
Re: Stock Purchase of Hongtex Hong Kong, Hongtex BVI and Cityford
Dear Mr. Wong:
The purpose of this letter of intent is to outline the preliminary discussions
and negotiations we have had regarding the proposed purchase of all issued and
outstanding stock of Hongtex Hong Kong, Hongtex BVI Holding Company and 51% of
City Ford and City Rich (the "Company") from the undersigned stockholders (the
"Sellers") by Beacon Light Holding Corporation, a Nevada corporation with its
corporate headquarters located in New York, New York, the acquisition
corporation (the "Buyer"). Any agreement between us (except for the binding
provisions of paragraphs 5, 6, 7, 8, 9, and 10 below) shall be subject to
execution of an Agreement of Sale and other final documentation in forms
satisfactory to the Sellers, the Buyer and each of their counsel. This letter
of intent does not contain all matters on which agreement must be reached in
order for sales transaction to be consummated as it is intended solely as an
outline of certain material terms.
Based on Buyer's knowledge of the Company and its assets, the purchase of all
the issued and outstanding stock of the Company will be made under the following
general terms and conditions, subject to the agreement of the parties.
1. Purchase Price. Buyer will purchase and the Sellers will sell all the
issued and outstanding stock of the Company for an aggregate consideration of 8
million 144 restricted shares of Beacon Light Holding Corporation, non-tradable
for a period of one year from date of issuance (the "Purchase Price"). In
addition, Buyer via Union Crown Investment, will make a banking facility
available for Hongtex, opening and T/R of $44 million HKD and a $6 million HKD
overdraft facility within an acceptable time frame after the completion of the
formalized contract between the Buyer and Seller. Buyer intends that Mr. Wong
will stay on as a director of the Company for an agreed monthly remuneration
plus a 20% profit sharing of the Company's combined net profit on a yearly
basis. It is further suggested that the China partner and Mr. Wong will share
the 49% shares equally between them.
2. Definitive Agreement. Promptly after the date of your acceptance of
this letter of intent, Buyer and Sellers will engage in good faith negotiations
with a view to executing a definitive Agreement of Sale within 15 days. The
Agreement of Sale will contain representations, warranties, covenants,
<PAGE> 181
conditions and indemnities of the Sellers which are customary to transactions of
the type described herein including, but not limited to, representations as to
accuracy and completeness of the financial statements of the Company, disclosure
of all contracts, commitments and liabilities, direct or contingent, the due
organization and proper capitalization of the Company, the compliance by the
Company with applicable provisions of law and regulations, and similar
provisions. The Agreement of Sale will also contain representations and
Warranties of Buyer which are customary to transactions of the type described
herein including but not limited to, representations as to the due organization
and proper capitalization of Buyer, and the compliance by Buyer with applicable
provisions of law and regulation.
2. Conditions to Closings. The closing of this transaction shall be
subject to the certain conditions to closing including but not limited to the
following:
a. Buyer's completion to its satisfaction of its due diligence
investigation, including investigation of the business and financial condition
of the Company.
b. The approval of the transaction and the Agreement of Sale by the Board of
Directors of the Buyer.
c. There shall have no material adverse change in the business or prospects
of the Company between the execution of this letter of intent and the closing of
the transaction contemplated hereby.
d. The negotiation and execution of an Agreement of Sale mutually acceptable
to the parties herein that contains representations warranties, covenants,
conditions, and indemnities customarily in transactions of this type.
e. That at closing all of the issued and outstanding stock of the Company
will be transferred to Buyer free and clear of all encumbrances, security
agreements and restrictions.
f. Discussions acceptable to Buyer shall have been had with material
suppliers related to the continuation of supplier relations and customers of the
Company, with the understanding that all discussions and communications with
such suppliers and customers will be with the consent and cooperation of the
Company.
g. That prior to closing all indebtedness of the Company to the Sellers of
any affiliates of the Company of the Sellers shall have been satisfied in full
or forgiven with no adverse tax consequences to the Company, and all
indebtedness of the Sellers and their affiliates to the Company shall have been
paid in full.
h. That prior to closing monthly reporting procedures acceptable to the
Sellers and their professional advisors shall be established.
4. Property. Buyer and Seller will work with the banks to negotiate a
mutually satisfactory transfer of the present facility to the new owners.
5. Expenses. Each of the parties hereto shall pay its own expenses in
connection with the transaction contemplated hereby.
6. Due Diligence. The consummation of the transaction contemplated
hereby will be subject to the satisfactory completion of a due diligence review
of the Company by the Buyer.
<PAGE> 182
7. Confidentiality. Without the express written consent of all the
parties hereto, each of the parties hereto agrees to maintain in confidence and
not disclose to any other person the existence of this letter, the terms of the
proposed transaction or the information delivered in connection with the
proposed due diligence investigation.
8. Governing Law. This Letter of Intent shall be governed by the
substantive laws of Hong Kong.
9. Conduct of Business. The Sellers agree that, pending negotiation of
the Agreement of Sales, they will cause the Company to operate its business only
in the usual, regular and ordinary course of its business.
10. In the event that at any time the Buyer determines not to proceed with
the transaction contemplated hereby, the Buyer will formally terminate this
letter of intent.
11. THIS LETTER OF INTENT IS NOT, AND YOUR ACCEPTANCE HEREUNDER DOES NOT
CONSTITUTE AN AGREEMENT TO CONSUMMATE THE TRANSACTION DESCRIBED HEREIN, OR ANY
AGREEMENT TO ENTER INTO A FORMAL CONTRACT WITH RESPERCT TO SUCH TRANSACTION. IT
IS UNDERSTOOD THAT THIS LETTER IS MERELY A STATEMENT THEREOF AND PROPOSAL TO
PROCEED PROPTLY AND IN GOOD FORM TO WORK OUT ARRANGEMENTS WITH REGARD TO THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY. ANY LEGAL OBLIGATIONS
BETWEEN THE PARTIES HERETO SHALL BE ONLY AS SET FORTH IN A DULY NEGOTIATED AND
EXECUTED FORMAL WRITTEN CONTRACT IF THE PARTIES ARE SUCCESSFUL IN NEGOTIATING
SAME, ACCORDINGLY, EXCEPT FOR THE PROVISIONS OF PARAGRAPHS 6, 7, 8, 9, 10, AND
11, WHICH SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF EACH OF US AND OUR
RESPECTIVE SUCCESSORS AND ASSIGNS, THIS LETTER OF INTENT DOES NOT CONSTITUTE A
BINDING AGREEMENT TO ENTER INTO AN AGREEMENT AND THE TERMS HEREOF ARE SUBJECT TO
THE EXECUTION AND DELIVERY OF A FORMAL AGREEMENT OF SALE. SUCH FORMAL AGREEMENT
OF SALE SHALL BE IN FORM AND CONTENT SATISFACTORY TO ALL PARTIES, INCLUDING
THEIR RESPECTIVE COUNSEL.
12. All previous agreements made before this letter are now to be considered
null and void.
If the foregoing is acceptable and sets forth our mutual understanding
concerning these matters, please so indicate by signing below and returning a
fully signed original to us on or before August 1, 1999.
BEACON LIGHT HOLDING CORPORATION
By: /s/Jerry Gruenbaum 7/16/99
--------------------------- -------
Jerry Gruenbaum, President Date
Accepted and agreed to the 19th day of July, 1999.
By: /s/ Wong Ko Tung 7/19/99
-------------------- -------
Wong Ko Tung, Director Date
183
EX-10.9
LIST OF SUBSIDIARIES OF REGISTRANT
SUBSIDIARIES OF REGISTRANT
Wellux Industries Ltd., a Hong Kong corporation, 100% owned.
Beacon Light Hong Kong Ltd., a Hong Kong corporation, 100% owned.
184
EX-23.1
CONSENT OF HOFFSKI & PISANO
CONSENT
We, Hoffski & Pisano, hereby consent to the use of our report relating to
the audited financial statements for years ended June 30, 1999, 1998 and 1997 in
a registration statement on Form 10-SB of Beacon Light Holding Corporation
(previously Beacon Light Mining Company) to be filed with the Securities and
Exchange Commission.
Dated: March 10, 2000
/s/Hoffski & Pisano
---------------------
Certified Public Accountants
Irvine, California
185
EX-23.1(i)
CONSENT OF RAYMOND CHING & CO.
CONSENT
We, Raymond Ching & Co., hereby consent to the use of our report relating
to the audited financial statements for years ended June 30, 1999 for Wellux
Industries Limited, a Hong Kong Corporation, in a registration statement on Form
10-SB of Beacon Light Holding Corporation (previously Beacon Light Mining
Company) to be filed with the Securities and Exchange Commission.
Dated: march 10, 2000
/s/Raymond Ching & Co.
-------------------------------
Certified Public Accountants
Hong Kong
186
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet for BEACON LIGHT HOLDING CORPORATION at June 30,
1999, and Consolidated Statement of Operations and Accumulated Deficit for the
fiscal year ended June 30, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 36,643
<SECURITIES> 0
<RECEIVABLES> 489,227
<ALLOWANCES> 0
<INVENTORY> 582,058
<CURRENT-ASSETS> 1,228,259
<PP&E> 330,051
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,571,712
<CURRENT-LIABILITIES> 1,281,089
<BONDS> 0
0
0
<COMMON> 16,096
<OTHER-SE> 274,527
<TOTAL-LIABILITY-AND-EQUITY> 1,571,712
<SALES> 4,109,017
<TOTAL-REVENUES> 4,109,017
<CGS> 2,391,724
<TOTAL-COSTS> 2,391,724
<OTHER-EXPENSES> 1,746,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (28,807)
<INCOME-TAX> 250
<INCOME-CONTINUING> (29,057)
<DISCONTINUED> (130,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159,057)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
