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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
FEBRUARY 23, 2000
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Date of Report
(Date of Earliest Event Reported)
BEVERLY HILLS LTD., INC.
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(Exact Name of Registrant as Specified in its Charter)
16 N. FORT HARRISON
CLEARWATER, FLORIDA 33755
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(Address of principal executive offices)
727/298-8771
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Registrant's telephone number
KEYNOTE ACQUISITION CORPORATION
1504 R STREET N.W.
WASHINGTON, D.C. 20009
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Former name and former address
UTAH 000-28523 87-0281305
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) On February 23, 2000, pursuant to an Agreement and Plan of
Reorganization (the "Acquisition Agreement") dated as of January 27, 2000,
Beverly Hills Ltd., Inc., ("Beverly Hills" or the "Company"), a Utah
corporation, acquired all the outstanding shares of common stock of Keynote
Acquisition Corporation ("Keynote"), a Delaware corporation, from shareholders
thereof in an exchange for an aggregate of 250,000 shares of common stock of
Beverly Hills (the "Acquisition"). As a result, Keynote became a wholly owned
subsidiary of Beverly Hills.
The Acquisition was adopted by the unanimous consent of the Board of
Directors of Beverly Hills on January 19, 2000. The Acquisition is intended to
qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.
Prior to the Acquisition, Beverly Hills had 15,325,957 shares of common
stock issued and outstanding, and 15,575,957 shares issued and outstanding
following the Acquisition.
Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission, Beverly
Hills became the successor issuer to Keynote for reporting purposes under the
Securities Exchange Act of 1934 (the "Act") and elects to report under the Act
effective February 23, 2000.
A copy of the Acquisition Agreement is filed as an exhibit to this Form 8-K
and is incorporated in its entirety herein. The foregoing description is
modified by such reference.
(b) The following table sets forth certain information with respect to the
beneficial ownership of Beverly Hills common stock as of February 23, 2000 with
respect (giving effect to the Acquisition) to: (a) each director of the Company;
(b) each of the Company's Executive Officers; (c) each shareholder known by the
Company to be the beneficial owner of more than 5% of the Company's common
stock; and (d) all executive officers and directors as a group. Unless otherwise
provided, the mailing address for the following persons is 16 N. Ft. Harrison,
Clearwater, Florida 33755:
[Table follows next page]
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COMMON STOCK
BENEFICIALLY OWNED
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NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENTAGE
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Triton Enterprises, Inc. (1)
5030 Champion Boulevard, Suite 6-212
Boca Raton, FL 33496 4,198,670 27.2%
Marc Barhonovich (2)
c/o Equity Advisors, Inc.
14502 N. Dale Mabry Highway
Tampa, FL 33618 3,613,000 21.7%
Makenzie Shea Inc. (3)
657 3rd Street
San Francisco, CA 94107 1,046,790 6.8%
Directors:
Marc Barhonovich (2)
c/o Equity Advisors, Inc.
14502 N. Dale Mabry Highway
Tampa, FL 33618 3,613,000 21.7%
Steven Velte (4)
c/o Beverly Hills Ltd., Inc.
16 N. Ft. Harrison
Clearwater, FL 33755 590,000 3.7%
Leon F. Willis, Jr. (5)
c/o Beverly Hills Ltd., Inc.
16 N. Ft. Harrison
Clearwater, FL 33755 200,000 1.3%
All directors and officers as a
group (3 persons) (6)
4,403,000 26.1%
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(1) Includes 100,000 shares which may be acquired upon the exercise of
outstanding warrants.
(2) Includes 1,000,000 shares which may be acquired upon the exercise of
outstanding warrants, 1,388,000 shares owned by Lehigh Enterprises, Ltd.,
1,000,000 shares owned by Peak Investment International ltd. Mr.
Barhonovich may be deemed to be the beneficial owner as a result of a trust
for the benefit of his minor children. Also includes a 50% interest in
390,000 shares owned by Barde, Inc.
(3) Consists of 241,790 shares owned of record by Makenzie Shea, 210,000 shares
owned by Avon Brill LLC, 110,000 shares held by Congo Capital, 275,000
shares owned by Dimension Capital and 210,000 owned by Haxlon Capital Corp.
All of such companies maintain an address co/o Makenzie Shea, Inc. and
Beverly Hills cannot determine whether all such shares are beneficially
owned by Makenzie Shea.
(4) Includes 450,000 shares which may be acquired upon the exercise of
outstanding options and warrants.
(5) Includes 100,000 shares which may be acquired upon the exercise of
outstanding warrants.
(6) Includes the shares which are deemed to be beneficially owned by each
officer and director, including 1,550,000 shares which may be acquired upon
the exercise of outstanding options and warrants.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Acquisition Agreement was
negotiated between Keynote and Beverly Hills.
In evaluating Beverly Hills as a candidate for the proposed Acquisition,
Keynote used criteria such as the value of the assets of Beverly Hills, Beverly
Hills's ability to compete in the golf information, reservation and
merchandising market, the increased use of the Internet as a tool in such
markets, Beverly Hills's current and anticipated business operations, and
Beverly Hills's business reputation in the Internet community. In evaluating
Keynote, Beverly Hills placed a primary emphasis on Keynote's status as a
reporting company under the Section 12(g) of the Act and Keynote's facilitation
of Beverly Hills's becoming a reporting company under the Act.
(b) Beverly Hills intends to strengthen its position in the Internet portal
line of business by further developing its World Wide Web technologies and by
placing the primary emphasis on Internet niche properties and companies that
share the focus and quality specific to the Company's current portfolio of
acquisitions. The Company intends to achieve this goal by enhancing growth at
its existing facilities and selectively acquiring additional Internet properties
and companies to take advantage of synergies available as a result of the
Company's future acquisitions. The following is a description of Beverly Hills'
business.
BUSINESS
Company
Beverly Hills is a multifaceted company focusing on building market share
in the recreation, media and merchandising business through the development of
leisure apparel, golf merchandise, media, travel and Internet sales, including
tee time reservations, web advertising, sales sites and related e-commerce
businesses.
Beverly Hills, indirectly through its ownership of Focused Media Limited,
owns Ireland based Global Golf Limited (www.globalgolf.com), an international
tee time reservation system. Global Golf offers information pertaining to golf
courses, accommodations and dining, among other things. As a result of several
agreements relating to the financing and operation of Global Golf, Beverly Hills
ownership in Global Golf may be reduced. The Global Golf web site currently
receives approximately 1,000,000 hits per month and Beverly Hills estimates that
the number of hits is increasing at a rate of 20% per month. Global Golf
provides information and tee time services for golf courses in many states in
the USA including Florida, South Carolina, Nevada, Virginia and Illinois. In
Europe Global Golf covers courses in Ireland, England, Scotland, Wales, Spain
and Portugal. Global Golf has also expanded into the Far East with clients in
Malaysia, Thailand and Singapore. Utilizing the Global Golf web site, golfers
can view in detail the courses to play, book tee times on-line, check
accommodations in the area, access tour operators who provide a service to that
destination and decide upon restaurants or local places of interest to visit.
Global Golf has developed its own proprietary tee reservation software and plans
to provide the software to the golf courses that participate in its Internet
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reservation system. Beverly Hills expects revenue to be derived from Global
Golf's operations through commissions paid by the golf courses, primarily as
percentage of green fees, and advertising income.
In addition to providing online golf-related information and tee time
services, Beverly Hills has established Beverly Hills Charity Auction Online
(www.BHAuction.com), one of the industry's first Internet based companies to
offer celebrity/charity auctions over the Internet. Beverly Hills Charity
Auction Online acts as a medium through which charities can raise funds by
reaching the millions of consumers that have access to the Internet. We expect
this service offering to generate revenue for Beverly Hills through commissions
on sales of auctioned items. We believe that this operation will not only be of
value to Beverly Hills but to charities worldwide seeking unique fundraising
opportunities.
In January 1999, Beverly Hills acquired all of the stock of Golf Shoes
Plus, Inc. (www.golfshoesplus.com), a retailer of high-quality name brand golf
shoes sold over the Internet and in retail stores. Also in January 1999, Beverly
Hills acquired all of the stock of Pro's Edge Wholesale, Inc., a wholesaler of
quality name brand golf accessories. Pro's Edge also manufactures "The Big Smoke
Driver" a patent-pending Titanium alloy oversized driver that is being sold via
the Internet (www.thebigsmoke.com). In March 1999, Beverly Hills acquired all of
the stock of Briar and Wood, Inc., the publisher of The Golfer Magazine. Beverly
Hills intends to continue future acquisitions of the Internet companies that fit
Beverly Hills' general acquisition criteria. However, currently, Beverly Hills
does not have a fixed source of capital to finance such future acquisitions. In
this respect, the Company intends to accomplish its acquisition plans by
exchange of Beverly Hills stock alone. There is no assurance given as to the
trading price or liquidity of Beverly Hills' common stock. Low trading price or
poor liquidity of the Company's common stock may adversely affect the Company's
ability to engage in future acquisitions and to accomplish its growth
objectives.
Corporate History
Beverly Hills Ltd., Inc. was first incorporated in Utah on, April 29, 1939
as Ophir Queen Mines Company. On June 15, 1974 Ophir Queen Mines Company changed
its name to Hawk International. The Company had substantial operations until
March 15, 1996 when the Company discontinued operations and entered the
development stage. Hawk International changed its name to Beverly Hills Country
Club on February 28, 1998 when it acquired HMW Golf d/b/a the Hanlon Group.
Beverly Hills Country Club then changed its name to Beverly Hills Ltd., Inc. on
August 13, 1998.
Strategies
Key strategic factors in establishing brand recognition and fostering
growth for our Internet-based businesses include:
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o Maintaining an upscale quality to all facets of our web sites;
o Covering all facets of upscale golf apparel, quality
merchandising, tee times, travel and hospitality, publishing,
golf information, and charity links to maximize each web site's
drawing power;
o Partnering with businesses with broad market exposure;
o Partnering with industry leading technology providers;
o Building and maintaining additional relationships inside and
outside of the golf industry to further the objectives of Global
Golf and the overall Beverly Hills Ltd. business plan; and
o Acting with speed and decisiveness to stay ahead of our
competitors.
As part of the Beverly Hills' overall business strategy, we intend to
integrate our Global Golf Internet business with our other product and service
offerings such that consumers will have easy access to online golf course
information and tee time reservations, golf merchandise, charity auction events
and The Golfer magazine. We expect future revenue to be generated through a
combination of retail sales, transaction fees, and advertisements on the various
web sites. We expect to increase the rates we charge for advertising on our web
sites as the numbers of visits to these sites increases. Also, we anticipate
that in the future we will be able to build an enormous database of visitors to
our web sites that can be used for other marketing opportunities. Beverly Hills
plans to continue to look for possible acquisition or partnering candidates
whose businesses fit synergistically with our current operations.
Global Golf Business
The Global Golf Division of Beverly Hills has been organized to create an
integrated blend of businesses that provide Beverly Hills with multiple sources
of revenue and, when combined, become a unique and powerful drawing card to the
Global Golf e-commerce site, www.globalgolf.com. Services or areas of business
expertise needed by the company, that fall outside of the main focus of Global
Golf, are being pursued through strategic partnerships. Some areas where this
approach is being pursued include marketing, technology and fulfillment. Global
Golf's strategy includes involving strategic partners in key areas allows the
company to remain flexible and lessens drag on resources. Management believes
that the combination of the integrated businesses, brand identity, strategic
partners and technology will provide Global Golf with key competitive advantages
in the marketplace.
Although the terms "portal" or "destination site" are used frequently in
the Internet market, Global Golf recognizes that branding and the combination of
services and products offered are the keys to actually achieving true "portal"
status. Other Beverly Hills subsidiaries provide Global Golf with building
blocks that help differentiate the site and provide the foundation for Beverly
Hills' expected revenue growth. They are also stepping stones to a much broader
business vision surrounding the Global Golf brand.
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Beverly Hills indirectly owns Ireland based Global Golf and
www.globalgolf.com, a site that was originally designed as an international tee
time reservation system but it has since been significantly enhanced. The site
offers information on where to play, where to stay, where to eat, related
recreational activities and other information. The Global Golf website currently
receives over 1,000,000 hits per month and is increasing at 20% per month.
Seeking to establish the Global Golf brand, Beverly Hills sought a
partnership agreement with International Limited ("CNBC Sports") under which
CNBC Sports would provide certain marketing resources at a discount. As a result
of this agreement, and disputes concerning the Beverly Hills performance of its
obligations under the partnership agreement, CNBC Sports has filed a claim
against Beverly Hills and certain of its present and former officers (see
"Litigation"). The parties have reached an agreement to settle the litigation.
Global Golf now covers many states in the USA including Florida, South Carolina,
Nevada, Virginia and Illinois. In Europe Global Golf covers Ireland, England,
Scotland, Wales, Spain and Portugal. Global Golf has also expanded into the Far
East with clients in Malaysia, Thailand and Singapore. Golfers can view in
detail the courses to play, including booking tee times on-line check
accommodations in the area, access tour operators who provide a service to that
destination and decide upon restaurants or local places of interest to visit.
Global Golf has developed its own proprietary tee reservation software and will
give the software to the golf courses that join their Internet reservation
system.
The business goal, then, is to establish Global Golf as the premier website
for golf and the dominance of the Global Golf brand, which is expected to be
measured by the quantity and quality of viewers drawn to the site, the number
and dollar value of transactions conducted, overall prestige of the site as
(partially) reflected in related website advertising, and strategic referral
relationships.
Beverly Hills and CNBC Sports have entered into various agreements for the
financing, development and operation of Global Golf. In addition, the Company is
negotiating for additional financing which may involve the transfer or issuance
of interests in Global Golf. The Company does not anticipate reducing its
ownership in Global Golf below a majority. There can be no assurance that any or
all of these transactions will be consummated. If Beverly Hills does not obtain
sufficient financing for Global Golf, Beverly Hills' Global Golf business would
suffer significant adverse effects.
Key Strategies
The key strategic factors in establishing www.globalgolf.com as the premier
golf website and the powerful Global Golf brand include the following:
o Maintaining an upscale quality to all facets of the site.
o Having a strong name for branding, i.e. Global Golf.
o Covering all facets of upscale golf apparel, quality
merchandising, tee times, travel and hospitality, publishing,
golf information, and charity links to maximize the drawing power
as well as "stickiness" to the site.
o Partnering with marketing strength, including CNBC, to maximize
quality exposure
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o Partnering with technological strength to ensure state-of-the-art
technology platforms as well as expertise in e-commerce.
o Building and maintaining additional myriad relationships inside
and outside of the golf world to further the objectives of Global
Golf and the overall Beverly Hills Ltd. business plan.
o Acting with speed and decisiveness (within the business plan
structure) to stay ahead of the competition in the torrid net
climate.
o Focusing on opportunities that will increase revenues AND ensure
profitability.
Revenues
It is clear that sustainability of a business in the Internet marketplace
will depend on many factors. But actually, the final arbiter of which businesses
survive is profitability. Price competition on wholesale and retail goods will
be, and is already, fierce. Margins are razor thin, and in some cases, many
products are being sold at a loss. Beverly Hills' Global Golf business model
seeks to avoid the necessity of selling merchandise at a loss as a means to
attract web site viewers and users.
The Global Golf business model attempts to achieve relief from this
unprofitable scenario by participating in revenues at each leg of a transaction.
All business conducted at the site is subject to transaction fees, whether it is
the sale of a pair of brand name golf shoes or the booking of a destination golf
weekend in Scotland. But Beverly Hills also owns the businesses that help make
the web site a valuable place to visit. The sale of brand name golf shoes
translate into revenue for the company through our Golf Shoes Plus, Inc.
subsidiary. All are sources of revenue for the company. We will be establishing
price points, determining specials, creating frequent buyer programs and
combination offers which we expect will maintain the margins we deem necessary
to remain profitable and viable.
As the number of visitors to the site increases so does the value of
advertising on the Global Golf site. The site is designed to allow visitors to
survey the geographic area surrounding a destination golf course. After booking
your reservation through the tee-time reservation system a customer might be
interested in the accommodations or restaurants nearby. There are estimated to
be 36,000 golf courses around the world. As Global Golf adds more golf course
clients to its reservation system, the opportunity to derive revenue from
ancillary advertisers such as local restaurants, entertainment venues, hotels
and related leisure activities is expected to increase. This source of revenue,
though inexpensive for the individual advertiser, can become significant for the
site.
The combined revenue sources for the Global Golf business model are:
1) Transactional fees at the web site for product sales
2) Revenue from each subsidiary (listed below and linked to
www.globalgolf.com)
3) Regional and national banners
4) Tee-time reservation fees
5) Advertising associated with specific destinations (i.e.
restaurant & hotel)
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It is our plan that the breadth and scope of the site, when complete, will
increase loyalty to the site and reduce our susceptibility to "bargain hunter"
shopping which is widespread on the Internet. This coupled with unique product
offerings, such as original golf art and specially licensed products not
available elsewhere, is expected to provide an additional buffer from the zero
margin trend that is impacting many Internet businesses. Value added no-fee
services such as chat rooms with your favorite Golf Pros, helpful hint sections,
etc. are also under consideration to help increase customer loyalty and traffic.
Finally, special programs rewarding loyalty or repetitive business are planned
in an effort to encourage frequent visits and discourage "surfing" to other
sites. Programs such as these will be implemented where appropriate.
Golf Related Businesses
Beverly Hills owns Golf Shoes Plus (GSP) (www.golfshoesplus.com), a
retailer of high-quality name brand golf shoes sold over the internet and in
retail stores, and Pro's Edge Wholesale, Inc. (PEW) a wholesaler of quality name
brand golf accessories. PEW also manufactures "The Big Smoke Driver" a patent-
pending Titanium alloy oversized driver that is being sold via the Internet
(www.thebigsmoke.com) and through advertisements in the Wall Street Journal.
Both companies are already profitable selling their products in retail outlets
and over the Internet. GSP began Internet sales in January 1998 and sales
increased 300% through the first quarter of 1999.
Beverly Hills also acquired Briar and Wood, Inc., the publisher of THE
GOLFER magazine. The Golfer is written for the serious player and looks at
travel, equipment, club life, fashion and instruction like no other has before
as it delves into the personalities and passions that shape the game. The Golfer
has a current circulation exceeding 200,000 [and reaches an affluent audience
with the highest demographics of any golf publication.] The average income for
current subscribers is $200,000 per annum.
This publication is profitable as an independent operation and is expected
to become an additional medium through which Beverly Hills can promote its
products and Internet businesses. Beverly Hills will also generate additional
revenue through crossover of the magazine advertisers to our Internet
businesses. The advertising partnership between the magazine and Internet
operations will allow for an increase in advertising rates and can add
significant corporate profits.
All Global Golf internet businesses will be networked together so that
consumers will have easy access to the magazine, golf merchandise, charity
auction, retail sales locations and corporate information sites. This is
expected to generate income for Beverly Hills both through retail sales,
transaction fees, and advertisements on the various Web sites. As the numbers of
visits to these sites increases it is expected that the rates that can be
charged for advertising will also increase. Also, Beverly Hills expects to build
a database of visitors to the sites that can be used for other marketing
opportunities.
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Employees
As of December 31, 1999, Beverly Hills employed approximately 30 full-time
employees and 5 part-time employees. Management considers relations between the
Company and its employees to be good.
Facilities
Beverly Hills' executive office is located at 16 N. Fort Harrison,
Clearwater, Florida 33755. Pro's Edge Wholesale occupies 1850 Boyscout Drive,
Unit 209, Ft. Myers, Florida 33907. Golf Shoes Plus occupies 1850 Boyscout
Drive, Unit 111, Ft. Myers, Florida, 33907. Beverly Hills Charity Auction is
located at 2320 US Highway 19, Holiday, Florida 34691. Briar and Wood has
offices at 21 East 40th Street, New York, New York. Global Golf has offices at
Unit 27 Templemore Business Park, Northland Road, Derry, North Ireland BT4800LD
Marketing
Beverly Hills intends to focus its promotional efforts on mass media, the
Internet and public relations to create product and service awareness in order
to develop a broader user base. This advertising campaign is intended to raise
general awareness of the Beverly Hills Auction, Global Golf, Golf Shoes Plus and
Golfer Magazine brands. This advertising campaign is intended to raise consumer
awareness through the placement of television, print and radio advertising.
Through Global Golf's relationship with CNBC Sports will air approximately $1.5
million of 30 second television commercials during the broadcast of European and
Asian golf tournaments. Beverly Hills also acquired $2.4 million of prepaid
print media advertising in major airline magazines. Beverly Hills has entered
into an advertising agreement with Sports By Line, a leading sports talk radio
show carried in over 200 U.S. affiliates in 140 countries through the Armed
Forces Network to provide $1.5 million of 30-60 second spots during prime time
talk shows. The agreement also includes 3,000,000 banner ad impressions in the
Sports Byline USA Website and CBS Sports Byline Website. Beverly Hills intends
to continue and expand its promotional efforts in order to reach a larger
targeted audience.
Trademarks and Patents
Beverly Hills and its subsidiaries have no patents or trademarks. Beverly
Hills' Pro Edge Wholesale, Inc. has filed a patent application [get copy] for
the Big Smoke Driver. Through Online Tee Time, Beverly Hills has requested the
following existing Internet Domain names which are used in its business:
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alumniave.com eterrain.com
alumniavenue.com globalgolf.com
bevelryhillsauction.com globalgolfart.com
beverlyhillsartgallery.com globalgolfstore.com
beverlyhillsgallery.com globalgolfsuperstore.com
bhauction.com golfshirtsplus.com
bhccauction.com golfshoesplus.com
bhchats.com onlineteetime.com
bhltd.com onlinettime.com
bhltdart.com supportyourcollege.com
bigsmoke.com thegolferonline.com
Beverly Hills and its subsidiaries have registrations for "Global Golf",
Beverly Hills Charity Auction", Beverly Hills Limited" and "Auction.Com."
Suppliers
Beverly Hills employs services of a number of suppliers whose services
range from providing high speed Internet access to financial and other news
content providers. Among many service providers are the following companies:
Digital Nation is the ISP (internet service provider) for the Beverly Hills
Auction.
Mindspring/Exite is the ISP for Global Golf.
Opensite provides auction software and support to Beverly Hills Charity
Auction.
Credit Card International and Cybercard provide Internet credit card
processing and security services to Beverly Hills Auction sites.
Vario, Inc. provides software that creates a virtual shopping cart on each
of Beverly Hills retail sites.
Litigation
Beverly Hills, Marc Barhonovich, Steven Velte and Michael Hanlon, an
officer of Global Golf, are defendants in an action pending in the United States
District Court for the Northern District of Georgia brought by CBS Sports
International Limited. the parties have settled this matter and it will be
dismissed upon Beverly Hills fully performing its obligation under the terms of
the settlement agreement.
Beverly Hills and its subsidiaries, Golf Shoes Plus, Inc. and Pro's Edge
Wholesale, Inc. are defendants in two related actions pending in the Circuit
Court of the 20th Judicial Circuit and County Court for Lee County, Florida. The
Plaintiff in the action, Randall J. Personett alleges breaches of the Stock
Purchase Agreement under which Beverly Hills acquired the Golf Shoes Plus and
Pro's Edge Wholesale, employment agreements with Golf Shoes Plus and Pro's Edge
Whoesale and seeks possession of the space occupied by these subsidiaries.
Beverly Hills and its subsidiaries have commenced an action in the above Circuit
Court against Mr. Personett alleging that Mr. Personett breached his employmnet
agreement with the subsidiaries and has breached his fiduciary obligations to
the subsidiaries. Both cases were recently commenced and Beverly Hills intends
to vigorously pursue its action.
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DESCRIPTION OF SECURITIES
Beverly Hills' authorized capital stock consists of 50,000,000 shares of
common stock, par value $.001 per share and 25,000,000 shares of preferred
stock, $.001 par value per share. As of February 23, 2000 , Beverly Hills had
15,575,975 shares of common stock issued outstanding and no shares of Series A
or Series B Preferred Stock issued and outstanding.
Common Stock
Holders of common stock are entitled to one vote for each share held and,
subject to preferences that may be applicable to any preferred stock outstanding
at the time, are entitled to receive dividends out of the assets legally
available therefor at such times and in such amounts as the Board of Directors
may from time to time determine. While payments of dividends rests within the
discretion of the Board of Directors, the Company anticipates that it will
retain earnings, if any, in order to finance expansion of its operations. Such
dividends, as may be declared by the Board of Directors, will be distributed to
common shareholders only in the event any outstanding shares of preferred stock
have been converted into shares of common stock. Common shareholders, in the
event of liquidation, dissolution, or sale of the Company, are entitled to
receive, on a pro rata basis, all assets of the Company remaining after
satisfaction of all liabilities and preferences held by preferred shareholders.
Preferred Stock
The Board of Directors is authorized, subject to certain limitations
prescribed by law and without further shareholder approval, to issue from time
to time up to an aggregate of 25,000,000 shares of preferred stock in one or
more series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions on the shares of each such series
thereof and the number of shares constituting any series or designations of such
series. The Board of Directors has designated 1,500,000 shares of preferred
stock as Series A Preferred Stock. The Series A Preferred Stock ranks senior to
the Company's common stock. The Board of Directors has also designated 1,000,000
shares of preferred stock as Series B Preferred Stock. The Series B Preferred
Stock ranks senior to the Company's common stock but junior to the Series A
Preferred stock. There are no shares of Series A Preferred Stock and no shares
of Series B Preferred Stock outstanding as of the date of this report.
Certain Articles of Incorporation and Bylaw Provisions
Shareholders' rights and related matters are governed by the Utah Revised
Business Corporation Act and the Company's Amended Articles of Incorporation and
Bylaws. The Company's Bylaws provide broad indemnification rights to directors
and officers for all expenses incurred by any person who is made a party to a
civil, criminal or administrative action, suit or proceeding by reason of the
fact that such person is or was at the time a director or officer of the Company
except where such person has been adjudged to be liable to the Company for
negligence or misconduct in the performance of his duties.
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Transfer Agent and Registrar
The transfer agent for the common stock of Beverly Hills is Fidelity
Transfer Agency, 1800 South West Temple, Salt Lake City, Utah 84115.
MARKET FOR THE COMPANY'S SECURITIES
Beverly Hills has been a non-reporting publicly traded company with certain
of its securities exempt from registration under the Securities Act of 1933
pursuant to Rule 504 of Regulation D of the General Rules and Regulations of the
Securities and Exchange Commission. The Company's common stock was traded on the
NASD OTC Bulletin Board under the symbol BLTD from March 24, 1998 to October 8,
1999. The Nasdaq Stock Market implemented a change in its rules requiring all
companies trading securities on the NASD OTC Bulletin Board to become reporting
companies under the Securities Exchange Act of 1934, since Beverly Hills was not
a reporting company on the date it was required to comply with these rules, it
was removed from the Bulletin Board.
Beverly Hills acquired all the outstanding shares of Keynote to become
successor issuer to it pursuant to Rule 12g-3 in order to comply with the
reporting company requirements implemented by the Nasdaq Stock Market.
The following table is bid price and volume information for Beverly Hills
common stock as reported by the OTC Bulletin Board for the periods indicated:
High Low Closing
Date Bid Bid Bid
---- ---- --- --------
Q3/1998 $ 6.875 $3 $5.25
Q4/1998 $ 6 $2 $4.5
Q1/1999 $ 8.375 $4.75 $8.25
Q2/1999 $11 $5 $7.5
Q3/1999 $10.5 $4 $4.625
The following table is trade information reported to the NASD by brokers
during the time that Beverly Hills has been quoted in the Pink Sheets:
Date High Price Low Price Closing Price
---- ---------- --------- -------------
Q3/1999 $5.5 $1.5 $1.5
(from October 8, 1999)
On February 29, 2000 the high, low and closing prices reported by brokers
to the NASD was $3 7/16, $2 7/8 and $3 1/16.
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Bid price information does not reflect actual sales prices and are prices
quoted between dealers.
MANAGEMENT
Executive Officers and Directors
The following table sets forth the executive officers and directors of
Beverly Hills, their ages and the positions they hold as of February 23, 2000.
NAME AGE POSITION(S)
- ---- --- -----------
Marc Barhonovich............ 37 President, Chief Executive Officer and
Director
Leon F. Willis, Jr.......... 65 Chief Financial Officer, Secretary,
Treasurer and Director
Steven Velte................ 38 Director
Marc Barhonovich, has served as a consultant to Beverly Hills since March
1998. Since 1997, Mr. Barhonovich has been the sole shareholder and President of
Equity Advisors, Inc., a corporation engaged in financial consulting to both
private and public companies. Mr. Barhonovich currently serves on the board of
directors for Florimed Health Group and in the past for American Dermatology
Network, Inc. Prior to 1997, Mr. Barhonovich served as Vice President of
Investments for Morgan Stanley Dean Witter.
Leon F. Willis, Jr. has served as Chief Financial Officer of Beverly Hills
since April 1999 and became a director December, 1999. Mr. Willis has over 20
years of experience in accounting and management including serving as the Senior
V.P. of Finance of Seaworld, Inc. Such previous experience includes serving as
chief financial officer and partner of Rosenbloom Marketing, Inc. Mr. Willis is
also President and Owner of Universal Truck Parts & Sales, Inc., a company which
sells truck parts and rebuilds drive train units. He is currently a director of
Asgard, a Development stage company traded on the Pink Sheets. Mr. Willis
graduated from San Diego State College with a B.S. in Accounting.
Steven Velte has served as a director of Beverly Hills since 1997. Mr.
Velte has served as a systems development engineer for Hewlett-Packard and
Agilent Technologies, Inc. for 15 years specializing in the placement of high
end telecommunications systems targeting network surveillance, fraud detection
and Internet traffic characterization. He is also president of RSV Productions,
an after-marketer of automotive specialty products. Mr. Velte is a graduate of
Virginia Technical Institute with a degree in Electrical Engineering.
14
<PAGE>
Executive Compensation
The following table sets forth certain summary information regarding the
compensation paid to and accrued for each of the Company's Chief Executive
Officers that served in such capacity during Fiscal 1999 and each of its other
executive officers whose total salary and bonus for the fiscal year ended
December 31, 1999 exceeded $100,000:
<TABLE>
<CAPTION>
Name and Year Other Restricted All Other
Principal Ended Annual Stock Options/ LTIP Compen-
Position Dec. 31, Salary Bonus Compensation Awards SARs Payouts sation
- ----------- --------- ------ ----- ------------ ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marc Barhonovich 1999 $ 15,624 $ -0- $ -0- -0- 1,000,000/0 $ -0- $ -0-
President, 1998 -0- -0- -0- -0- 0/0 -0- -0-
Chief Executive 1997 -0- -0- -0- -0- 0/0 -0- -0-
Officer (1)
Cliff Wildes 1999 $ 55,250 $ -0- $ -0- -0- 185,000/0 $ -0- $ -0-
Chief Executive 1998 -0- -0- -0- -0- 0/0 -0- -0-
Officer(2) 1997 -0- -0- -0- -0- 0/0 -0- -0-
</TABLE>
- -------------
(1) Became a director and chief executive officer in November 1999.
(2) Resigned July, 1999
Stock Option Plan
In January, 2000, the Board of Directors adopted the Beverly Hills Ltd.,
Inc. 2000 Employee Stock Incentive Plan (the "2000 Plan"). Pursuant to the 2000
Plan, subject to shareholder approval, eligible participants of the Company, its
subsidiaries and affiliates may receive, until January 10, 2010, stock options,
stock appreciation rights, restricted stock or deferred stock awards for up to
3,000,000 shares of the Company's Common Stock.
Pursuant to the 2000 Plan, an independent committee, in its discretion,
determines those directors of the Company to be granted Director Stock Options
and those officers and other key employees of the Company, its subsidiaries and
affiliates to be granted Employee Stock Options, Stock Appreciation Rights,
Restricted Stock Awards or Deferred Stock Awards or a combination, thereof; the
type of grants to be made; the number of shares subject to such grants; the
terms and conditions of the awards, including restrictions on Director Stock
Options, Employee Stock Options or other awards and/or the stock relating
thereto based on performance and/or such other factors as the Committee in its
sole discretion determines and vesting acceleration features based on
performance and/or such other factors as the Committee in its sole discretion
determines; and whether, to what extent and under what circumstances stock and
other amounts payable with respect to an award may be deferred either
automatically or at the participant's election. No grants of options to purchase
shares were made under the 2000 Plan during the year ended December 31, 1999.
15
<PAGE>
The following table sets forth as to each executive officer of the Company
listed in the Summary Compensation table above concerning certain options and
warrants granted during the year ended December 31, 1999:
<TABLE>
<CAPTION>
% of Total
Options and Warrants/
Options/ SARs Granted to
SARs Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price Per Share Date
- ---- -------- ---------------------- ---------------- ----------
<S> <C> <C> <C> <C>
Marc Barhonovich 1,000,000/0 30%/N/A $ .05 11/20/2004
Cliff Wildes 185,000/0 6%/N/A $ .10 5/31/2001
</TABLE>
The following table sets forth as to each executive officer listed in the
Summary Compensation table above certain information concerning the exercise of
options during the year ended December 31, 1999 and options outstanding as of
such date:
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised in-the-Money
Shares Options Options
Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
- ----- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Marc Barhonovich 0 $ 0 1,000,000/0 $1,450,000/0
Cliff Wildes 0 $ 0 185,000/0 $ 259,000/0
</TABLE>
Board Report on Executive Compensation
The Board of Directors did not, during the year ended December 31, 1999,
have a compensation or similar committee. Accordingly, the full Board of
Directors is responsible for determining and implementing the compensation
policies of the Company.
The Board's executive compensation policies are designed to offer
competitive compensation opportunities for all executives which are based on
personal performances, individual initiative and achievement, as well as
assisting the Company in attracting and retaining qualified executives. The
Board also endorses the position that stock ownership by management and
stock-based compensation arrangements are beneficial in aligning management's
and stockholders' interests in the enhancement of stockholder value.
Compensation paid to the Company's executive officers generally consists of
the following elements: base salary, annual bonus and long-term compensation in
the form of stock options. Compensation levels for executive officers of the
Company is determined by a
16
<PAGE>
consideration of each officer's initiative and contribution to overall corporate
performance and the officer's managerial abilities and performance in any
special projects that the officer may have undertaken. Competitive base salaries
that reflect the individual's level of responsibility are important elements of
the Company's executive compensation philosophy. Subjective considerations of
individual performance are considered in establishing annual bonuses and other
incentive compensation. In addition, the Board considers the Company's financial
position and cash flow in making compensation decisions.
Mr. Barhonovich's Compensation and Employment Agreement
Mr. Barhonovich entered into a employment agreement with Beverly Hills on
November 15, 1999. Pursuant to the agreement, as amended, Mr. Barhonovich is to
serve as the Company's Chief Executive Officer for a term ending November 14,
2000, at which time the agreement is automatically extended for successive
additional terms of one year, unless either party has notified the other of its
intention to terminate the agreement thirty days prior to the expiration of the
term. The agreement provides for annual cash compensation of $125,000 during the
term and entitles Mr. Barhonovich to certain fringe benefits, including an
automobile and its maintenance, disability insurance, medical benefits and life
insurance coverage the cash value of which is payable to Mr. Barhonovich in the
event he retires after the age of 55. Mr. Barhonovich has agreed that during the
term of his agreement and for the twelve months thereafter (unless the agreement
is terminated by the Company without cause), he will be subject to
non-competition provisions. The agreement further provides for Mr. Barhonovich
to be granted 1,000,000 warrants which vested February 15, 2000 and are
exercisable for $.05 per share for a period of five years. Upon termination of
employment without cause, Mr. Barhonovich will be entitled to receive a lump sum
cash payment equal to the remaining base salary due through the expiration of
the term and the product of the number of full years employed times $75,000.
Director Compensation
Beverly Hills does not have a policy relating to compensating the members
of its Board of Directors. In January 1999, the Board of Directors voted to
award 100,000 shares of Beverly Hills' common stock to each of the members of
the Board, each member abstaining from voting with respect to his own stock
award. The value for such shares, as determined by Beverly Hills' Board of
Directors, was $1.00 per share.
RISK FACTORS
An investment in Beverly Hills involves a high degree of risk. You should
consider an investment in Beverly Hills only if you can afford to lose your
entire investment. In addition to the other information in this report, the
following risk factors should be considered carefully in evaluating an
investment in our common stock. When used in this report, the words "expect,"
"anticipates," "intends" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. These risks and uncertainties include, but are not limited to, those
risks discussed below and elsewhere in this report. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors discussed below and elsewhere in the report.
17
<PAGE>
We Have Recently Implemented a New Business Plan and We Anticipate Operating
Losses in the Near Term
Beverly Hills commenced its current business operations in February 1998.
Accordingly, we have little meaningful operating history upon which an
evaluation of our business and its prospects can be based. Although the
corporate entity has been in place for many years, because we have implemented a
new business plan, Beverly Hills business and it's prospects must be considered
in light of the risks, expenses and difficulties frequently encountered by
companies in their early stages of development. In the foreseeable future, we
will be required to among other things:
o attract, retain and motivate qualified personnel;
o implement and successfully execute our business strategy;
o respond to competitive developments;
o develop and market additional products and services; and
o develop and enhance its existing product and services.
There can be no assurance that we will be successful in addressing these
business requirements. In addition, our limited operating history makes the
prediction of future overall results difficult or impossible. We expect to
incur substantial expenses related to the development of our business, marketing
activities and personnel, among other things. We expect to incur net operating
losses in the foreseeable future. There can be no assurance that we will be able
to achieve and maintain profitability.
We are Uncertain Whether the Market Will Accept our Internet-based Product and
Service Offering and the Size of the Market for our Products and Services is
Unknown
In order to achieve anticipated growth rates, our products and services
must achieve broad market acceptance. There can be no assurance that the market
acceptance attained by our existing products will be sustained or will grow. In
addition, we cannot guaranty that future products and services will . Because
the market for golf-related products and services of the type offered by us is
constantly changing, we are unable to accurately estimate the commercial
viability and market demand for the range of products and services offered by
us. We believe that the current market for golf-related products and services
utilizing Internet technology is in an early stage of growth. However, we can
give no assurance that the market will in fact grow at the rates projected by
us, or at all. If that market does not grow rapidly, or if we are not able to
obtain sales from growth in that market, we will incur substantial operating
losses. Moreover, as the novelty of golf- and leisure-related products and
services delivered via Internet technology diminishes over time, we may not be
able to retain customers. We will be required to invest substantial resources in
developing awareness of and confidence in our on-line products and services and
there can be no assurance that we will have the resources necessary to be
successful.
Our Success Depends on Our Key Executives
Our business depends on the continued efforts of our key technical
employees and managers. We cannot guarantee that any individual will continue in
his or her present capacity
18
<PAGE>
with us for any particular period of time. In addition, at this time we do not
maintain "key person" life insurance policies on the lives of any of our
personnel.
Our Business Could be Hurt By Competition
We will compete with other golf products and services providers and other
Internet vendors. In addition, the market for Internet services is highly
competitive and competition is expected to increase significantly due to
anticipated growth of the Internet as a means of communication and commerce.
There are no effective barriers that will prevent a potential competitor from
entering the market. Current providers of golf-related products and services may
decide to provide these products and services over the Internet and compete
directly with us. If so, many of our competitors would have greater financial,
development, technical, marketing and sales resources than we have and would
have greater expertise and established brand recognition. In addition, there can
be no assurance that our competitors will not develop products and services that
are superior to our products and services or that achieve greater market
acceptance than our products and services.
Risk of Inaccuracy of Projections and other Forward-Looking Statements
This report contains certain forward-looking statements, including, among
others:
o Our ability to execute our business strategies and generate
revenues from our Internet-based operations; and
o Our ability to finance future growth and possible acquisitions
through the issuance of shares of our common stock.
These forward-looking statements are based upon a number of assumptions and
estimates that, while considered reasonable by us when taken as a whole, are
inherently subject to significant business, economic, and competitive
uncertainties and contingencies, many of which are beyond our control, and are
based upon specific assumptions with respect to future business decisions, many
of which will change. It can be anticipated that some or all of the assumptions
underlying the projections and forward-looking statements included herein will
not materialize or will vary significantly from actual results. Accordingly, it
can be expected that actual results will vary from the projections and that such
variations, in all likelihood, will be material and are likely to increase over
time.
In addition to the other risks described elsewhere in this Risk Factors
discussion, important factors to consider and evaluate in such forward-looking
statements include:
o changes in the external competitive market factors or in our
internal budgeting process which might impact our results of
operations;
o unanticipated working capital or other cash requirements; and
o changes in our business strategy or an inability to execute our
strategy due to unanticipated changes in our targeted market.
19
<PAGE>
In light of these risks and uncertainties, many of which are described in
greater detail elsewhere in this "Risk Factors" discussion, we cannot give
assurance that the forward-looking statements contained in this report will in
fact transpire.
Limited History of Operations; History of Losses
Beverly Hills and its subsidiaries have only a limited history of
operations with periods of net operating losses. During the period from March
15, 1996 (inception) to December 31, 1998, Beverly Hills experienced a loss from
its operations in the amount of $1,432,936 and during the nine months ended
September 30, 1999 the net loss was $1,915,965 (including a non-recurring gain
of $1,485,000 from the sale of an interest in Global Golf). Beverly Hills'
operations are subject to the risks and competition inherent in the
establishment of a relatively new business enterprise in a competitive field of
Internet start-up companies. There can be no assurance that future operations
will be profitable. Revenues and profits, if any, will depend upon various
factors, including market acceptance of its concepts, market awareness, its
ability to expand its network of participating Internet companies, reliability
and acceptance of the Internet commerce, dependability of its advertising and
recruiting network, and general economic conditions. There is no assurance that
Beverly Hills will achieve its expansion goals and the failure to achieve such
goals would have an adverse impact on it.
Adverse Economic Conditions or a Change in General Market Patterns
A weak economic environment could adversely affect Beverly Hills sales and
promotional efforts. General economic conditions impact Internet based and
related commerce and demand and interest for Beverly Hills' Internet services
may decline at any time, especially during recessionary periods. Many factors
beyond Beverly Hills' control may decrease overall demand for Internet portal
services including, among other things, decrease in the entry costs by other
similarly situated companies, increase in the overall unemployment rate,
additional government regulation. There can be no assurance that the general
market demand for Internet portal services and related fields will remain the
same or will not decrease in the future.
Reliance on Future Acquisitions Strategy
Beverly Hills expects to continue to rely on acquisitions as a primary
component of its growth strategy. Beverly Hills regularly engages in evaluations
of potential target candidates, including evaluations relating to acquisitions
that may be material in size and/or scope. There is no assurance that Beverly
Hills will continue to be able to identify potentially successful companies that
provide suitable acquisition opportunities or that Beverly Hills will be able to
acquire any such companies on favorable terms. Also, acquisitions involve a
number of special risks including the diversion of management's attention,
assimilation of the personnel and operations of the acquired companies, possible
loss of key employees. There is no assurance that the acquired companies will be
able to successfully integrate into Beverly Hills' existing infrastructure or to
operate profitably. There is also no assurance given as to Beverly Hills'
ability to obtain adequate funding to complete any contemplated acquisition or
that such acquisition will succeed in enhancing Beverly Hills' business and will
not ultimately have an adverse effect on Beverly Hills' business and operations.
20
<PAGE>
Lack of Continued Development of E-Commerce Market
The use of the Internet and the World Wide Web for commercial purposes is
expanding dramatically. There is no assurance, however, that as increased
commerce takes place on the Internet that unforeseen overloads, lack of
sufficient hardware, telephone availability or other problems may develop. In
addition, consumer use of the Internet for purchases, banking, and other
commercial uses may decline for any number of reasons such as security problems,
overload difficulties, shopping trends, or slow Internet access. These
difficulties may undermine Company's expansion and promotional efforts. There is
no assurance that Beverly Hills will be able to successfully overcome these
difficulties and maintain its competitive pricing and services.
Loss of Beverly Hills Key Employees May Adversely Affect Growth Objectives
Beverly Hills success in achieving its growth objectives depends upon the
efforts of Marc Barhonovich as well as other key management personnel. Their
experience and industry-wide contacts significantly benefit Beverly Hills. The
loss of the services of these individuals could have a material adverse effect
on Beverly Hills business, financial condition and results of operations. There
is no assurance that Beverly Hills will be able to maintain and achieve its
growth objectives should it lose any of its key management members' services.
Competition From Larger and More Established Companies May Hamper Market Ability
The competition in the Internet and electronic commerce industry is
intense. Large and highly fragmented, this industry hosts a number of
well-established competitors, including national, regional and local companies
possessing greater financial, marketing, personnel and other resources than
Beverly Hills. There is no assurance that Beverly Hills will be able to market
or sell its products if faced with direct product and services competition from
these larger and more established Internet portal services providers.
Failure to Attract Qualified Personnel
A change in labor market conditions that either further reduces the
availability of employees or increases significantly the cost of labor could
have a material adverse effect on Beverly Hills' business, financial condition
and results of operations. Beverly Hills' business is dependent upon its ability
to attract and retain highly trained and qualified technical personnel and
corporate management. There is no assurance that Beverly Hills will be able to
employ a sufficient number of qualified training personnel in order to achieve
its growth objectives.
Issuance of Future Shares May Dilute Investor Share Value
The Certificate of Incorporation, as amended, of Beverly Hills authorizes
the issuance of 50,000,000 shares of common stock and 25,000,000 shares of
preferred stock. The future issuance of all or part of the remaining authorized
common stock and/or all or part of the preferred stock may result in substantial
dilution in the percentage of Beverly Hills' common stock held by its then
existing shareholders. Moreover, any common stock issued in the future may be
valued on an arbitrary basis by Beverly Hills. The issuance of Beverly Hills
21
<PAGE>
shares for future services or acquisitions or other corporate actions may have
the effect of diluting the value of the shares held by investors, and might have
an adverse effect on any trading market, should a trading market develop for
Beverly Hills' common stock.
Penny Stock Regulation
Penny stocks generally are equity securities with a price of less than
$5.00 per share other than securities registered on certain national securities
exchanges or quoted on the Nasdaq Stock Market, provided that current price and
volume information with respect to transactions in such securities is provided
by the exchange or system. Beverly Hills' securities may be subject to "penny
stock rules" that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the "penny stock rules" require the delivery, prior to the transaction,
of a disclosure schedule prescribed by the Commission relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities. Finally, monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. Consequently, the
"penny stock rules" may restrict the ability of broker-dealers to sell Beverly
Hills' securities. The foregoing required penny stock restrictions will not
apply to Beverly Hills' securities if such securities maintain a market price of
$5.00 or greater. There can be no assurance that the price of Beverly Hills'
securities will reach or maintain such a level.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election.
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the
Securities and Exchange Commission, upon effectiveness of the Acquisition,
Beverly Hills became the successor issuer to Keynote for reporting purposes
under the Securities Exchange Act of 1934 and elects to report under the Act
effective February 23, 2000.
22
<PAGE>
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The sole officer and director of Keynote has resigned upon closing of the
Acquisition and the Directors as set forth in Item 2 above have replaced such
person.
ITEM 7. FINANCIAL STATEMENTS
AUDITED FISCAL YEAR END DECEMBER 31, 1998 AND 1997
1. Index to Financial Statements
2. Independent Auditor's Report F-1
3. Balance Sheets, December 31, 1998 and 1997 F-2
4. Consolidated Statements of Operations for each of the years ended
December 31, 1998 and 1997 and for the period from March 15, 1996
(inception) to December 31, 1998 F-3
5. Consolidated Statements of Stockholder's Equity (deficiency in
assets) since December 31, 1996 F-4
6. Consolidated Statements of Cash Flows for each of the years ended
December 31, 1998, and 1997 , and for the period from March 15,
1996 (inception) to December 31, 1998 F-5
7. Notes to Financial Statements F-6-10
8. Supplementary Information F-11
9. Independent Auditors Report on Supplementary
Information F-12
10. Schedule 1 Consolidating Balance Sheet F-13
11. Consolidating Statement of Operations F-14
23
<PAGE>
UNAUDITED FINANCIAL STATEMENTS FOR NINE MONTHS ENDED DECEMBER 30, 1999 AND 1998
12. Balance Sheets, September 30, 1999 F-15
13. Consolidated Statements of Operations for the nine months ended
September 30, 1999 F-16
14. Consolidated Statements of Stockholder's Equity since December
31, 1998 F-17
15. Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 F-18
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable. The Company has a fiscal year ending on December 31.
EXHIBITS
2.1 Agreement and Plan of Reorganization between Beverly Hills Ltd., Inc. and
Keynote Acquisition Corporation, dated as of January 27, 2000.
2.2 Amendment dated February 17, 2000 to Agreement and Plan of Reorganization,
dated as of January 19, 2000.
3.1 Amended and Restated Articles of Incorporation of Beverly Hills Ltd., Inc.
3.2 Amended and Restated By-Laws of Beverly Hills Ltd., Inc.
27.1 Financial Data Schedule.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
BEVERLY HILLS LTD., INC.
By: /s/ MARC BARHONOVICH
-------------------------------
Marc Barhonovich, President
Dated: March 10, 2000
25
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
<PAGE>
Consolidated Financial Statements
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
CONTENTS:
Independent Auditors' Report .............................................. 1
Consolidated Financial Statements:
Consolidated Balance Sheets ............................................. 2
Consolidated Statements of Operations ................................... 3
Consolidated Statements of Stockholders' Equity (Deficiency in Assets) .. 4
Consolidated Statements of Cash Flows ................................... 5
Notes to Consolidated Financial Statements .............................. 6
Independent Auditors' Report on Supplementary Information ................. 12
Supplementary Information:
Consolidating Balance Sheet ............................................. 13
Consolidating Statement of Operations ................................... 14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Beverly Hills Limited, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Beverly Hills
Limited, Inc. (a development stage company) and subsidiary as of December 31,
1998 and 1997, and the related consolidated statements of operations,
stockholders' equity (deficiency in assets) and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Beverly Hills
Limited, Inc. as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note H, the
Company's recurring operating losses and lack of working capital raise
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to those matters is also described in Note H. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty.
/s/ SMITH & RADIGAN CPA'S, LLC
--------------------------------------
Smith & Radigan CPA's, LLC
Atlanta, Georgia
July 6, 1999
F-1
<PAGE>
Consolidated Balance Sheets
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
ASSETS
December 31,
--------------------------
1998 1997
----------- -----------
CURRENT ASSETS
Cash $ -0- $ 983
----------- -----------
TOTAL CURRENT ASSETS -0- 983
PROPERTY AND EQUIPMENT
Equipment 2,168 0
Less: allowance for depreciation 60 0
----------- -----------
2,108 0
----------- -----------
OTHER ASSETS
Organization costs, net 463 695
----------- -----------
463 695
----------- -----------
$ 2,571 $ 1,678
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
December 31,
--------------------------
1998 1997
----------- -----------
CURRENT LIABILITIES
Cash overdraft $ 41,310 $ -0-
Accrued interest 61,677 29,677
Accounts payable 48,782 648
Loans payables to affiliates 218,636 117,123
----------- -----------
TOTAL CURRENT LIABILITIES 370,405 147,448
LONG-TERM DEBT
Notes payable to stockholder 416,000 129,000
STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Preferred stock, par value $0.001 per share:
Authorized X 25,000,000 shares
Issued and outstanding X -0- shares -0- -0-
Common stock, par value $0.001 per share:
Authorized for 1998 -- 50,000,000 shares
Issued and outstanding -- 11,568,134 11,568
Authorized for 1997 -- 20,000,000 shares
Issued and outstanding -- 11,001,509 11,002
Additional paid-in capital 685,944 100,542
Retained deficit (accumulated deficit during
development stage of $1,432,936) (1,481,346) (386,314)
----------- -----------
(783,834) (274,770)
----------- -----------
$ 2,571 $ 1,678
=========== ===========
The Notes to Consolidated Financial Statements are an integral part of these
Statements.
F-2
<PAGE>
Consolidated Statements of Operations
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
Total Since
Inception of
For the Years Ended Development
December 31, Stage
---------------------------- on 3/15/96
1998 1997 to 12/31/98
------------ ------------ ------------
OPERATING EXPENSES
Advertising $ 6,020 $ -0- $ 6,020
Amortization and depreciation 292 271 563
Dues and subscriptions 897 310 1,207
Insurance 31,830 691 32,521
Licenses and permits 670 260 930
Office expense 20,861 14,509 35,370
Professional fees 555,224 44,126 599,654
Rental expense 10,479 6,419 16,898
Service charges 34,652 16,488 65,017
Travel and entertainment 186,784 49,641 305,527
Utilities 22,928 10,821 33,749
Taxes 540 540 1,080
Miscellaneous 23,855 3,775 27,630
------------ ------------ ------------
Total operating expense 895,032 147,851 1,126,166
------------ ------------ ------------
OPERATING LOSS BEFORE NON
RECURRING ITEM (895,032) (147,851) (1,126,166)
NON RECURRING ITEM
Loss on abandoned development 200,000 106,770 306,770
------------ ------------ ------------
NET LOSS $ (1,095,032) $ (254,621) $ (1,432,936)
============ ============ ============
NET LOSS PER SHARE $ (.10) $ (.05) $ (.24)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES 11,143,402 5,084,250 6,122,677
============ ============ ============
The Notes to Consolidated Financial Statements are an integral part of these
Statements.
F3
<PAGE>
Consolidated Statements of Stockholders' Equity (Deficiency in Assets)
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Paid-In
Common Stock Capital
------------------------------ (Discount Retained
No. of on Common Earnings
Shares Amount Stock) (Deficit) Total
----------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 12,276,958 $ 122,770 $ (81,902) $ (131,693) $ (90,825)
February 1997, stock issued
For services at par value 2,718,042 27,180 -0- -0- 27,180
July 1997, 10 to 1 reverse
stock split (13,495,491) -0- -0- -0- -0-
August 1997, stock issued for
loan repayment 8,502,000 85,020 (48,524) -0- 36,496
October 1997, stock issued
for acquisition of subsidiary 1,000,000 10,000 (3,000) -0- 7,000
December 1997 par value amended
from $0.01 to $0.001 -0- (233,968) 233,968 -0- -0-
Net loss for the year ended
December 31, 1997 -0- -0- -0- (254,621) (254,621)
----------- --------------- ----------- --------------- -----------
Balance at December 31, 1997 11,001,509 $ 11,002 $ 100,542 $ (386,314) $ (274,770)
January 1998, stock issued for
services 178,225 178 178,047 -0- 178,225
January 1998, stock issued for cash 362,000 362 379,638 -0- 380,000
December 1998, stock issued for services 2,100 2 2,098 -0- 2,100
December 1998, stock issued for cash 24,300 24 25,619 -0- 25,643
Net loss for the year ended
December 31, 1998 -0- -0- -0- (1,095,032) (1,095,032)
----------- --------------- ----------- --------------- -----------
Balance at December 31, 1998 11,568,134 $ 11,568 $ 685,944 $ (1,481,346) $ (783,834)
=========== =============== =========== =============== ===========
Reconciliation of retained deficit
during development stage:
Retained deficit from operations
at March 15, 1996 $ (48,410)
Net loss from development stage
for the period March 16, 1996
to December 31, 1996 (83,283)
Net loss from development stage for
the year ended December 31, 1997 (254,621)
Net loss from development stage for
the year ended December 31, 1998 (1,095,032)
-----------
Accumulated retained deficit during
development stage at December 31, 1998 (1,432,936)
---------------
Retained deficit at December 31, 1998 $ (1,481,346)
===============
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
Statements.
F4
<PAGE>
Statements of Cash Flows
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Total Since
Inception of
For the Years Ended Development
December 31, Stage
-------------------------- on 3/15/96
1998 1997 to 12/31/98
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,095,032) $ (254,621) $(1,432,936)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Common stock issued for services 180,325 34,181 214,506
Amortization and depreciation 292 232 758
Decrease (increase) in:
Organization costs -0- -0- (1,161)
Development costs -0- 106,770 -0-
Increase (decrease) in:
Accounts payable 26,594 21,539 48,582
Accrued interest 32,000 15,800 61,677
----------- ----------- -----------
Total adjustments 239,211 178,522 324,362
----------- ----------- -----------
Net cash used by operating activities (855,821) (76,099) (1,108,574)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash payments for office equipment (2,168) -0- (2,168)
----------- ----------- -----------
Net cash used by investing
activities (2,168) -0- (2,168)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 410,053 112,446 634,636
Proceeds from issuance of common stock 405,643 -0- 434,796
Principal payments from stockholder
loans -0- -0- (3,505)
----------- ----------- -----------
Net cash provided by
financing activities 815,696 112,446 1,065,927
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (42,293) 36,347 (44,815)
CASH AND CASH EQUIVALENTS (OVERDRAFT)
AT BEGINNING OF YEAR 983 (35,364) 3,505
----------- ----------- -----------
CASH AND CASH EQUIVALENTS (OVERDRAFT)
AT END OF YEAR $ (41,310) $ 983 $ (41,310)
=========== =========== ===========
NON-CASH TRANSACTIONS:
Par value amended from $.01 to $.001 $ -0- $ 233,968 $ 233,968
=========== =========== ===========
Common stock issued for loan
repayment $ -0- $ 36,495 $ 36,495
=========== =========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
Statements.
F-5
<PAGE>
Notes to Consolidated Financial Statements
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note A -- Summary of Significant Accounting Policies
Organization
Beverly Hills Limited, Inc. (the Company, traded on NASDAQ Bulletin Board) was
first incorporated in Utah on April 29, 1939 as Ophir Queen Mines Company. On
June 15, 1974, Ophir Queen Mines Company changed its name to Hawk International.
The Company had substantial operations until March 15, 1996 when the Company
discontinued operations and entered the Development Stage. Subsequent to the
merger (see Note B), Hawk International changed its name to Beverly Hills
Country Club on February 28, 1998. Beverly Hills Country Club then changed its
name to Beverly Hills Limited, Inc. on August 13, 1998.
The Company is a developmental stage company as defined in Financial Accounting
Standards Board Statement No. 7. It is concentrating substantially all of its
efforts in raising capital and searching for a business operation with which to
merge, or assets to acquire, in order to generate significant operations.
Principles of Consolidation
The financial statements include the accounts of the Company and its
wholly-owned subsidiary, HMW Golf d/b/a The Hanlon Group (a Development Stage
Company). All intercompany transactions have been eliminated.
Accounting Method
The Company recognized income and expense on the accrual basis of accounting.
Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Cash and Equivalents
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
Property and Equipment
All property and equipment is recorded at cost and depreciated over their
estimated useful lives, which is three years for computers, using the
straight-line method. Depreciation expense for the year ended December 31, 1998
totaled $60.
Organization Costs
Organization costs are being amortized over a five year period on a
straight-line basis. Amortization expense totaled $232 for each of the years
ended December 31, 1998 and 1997.
F-6
<PAGE>
Notes to Consolidated Financial Statements -- Continued
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note A -- Summary of Significant Accounting Policies -- Continued
1998 1997
---- ----
Organization Costs $ 1,161 $ 1,161
Accumulated Amortization (698) (466)
------- -------
$ 463 $ 695
======= =======
Income Taxes
The Company accounts for income taxes under the liability method. Under this
method, deferred income taxes are recorded to reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting and the amounts used for income taxes.
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 B -- Acquisition of HMW Golf d/b/a The Hanlon Group
On October 27, 1997, the Company acquired one-hundred percent of the common
stock of HMW Golf d/b/a The Hanlon Group (the Subsidiary) a Georgia corporation,
in exchange for not less than ten percent of the outstanding common stock
(1,000,000 shares) of the Company. The acquisition was recorded as a pooling of
interest method of accounting. Prior to this acquisition, the Subsidiary's year
end was October 31st. The Subsidiary changed its year end to December 31st to
correspond with the Company's.
Revenues and net income for the Company and the pooled subsidiary prior to their
respective merger for the years ended December 31, were as follows:
1998 1997
---------- ----------
Revenues
Company $ -0- $ -0-
Pooled subsidiary -0- -0-
---------- ----------
Combined $ -0- $ -0-
---------- ----------
Net loss
Company $ 896,236 $ 27,180
Pooled subsidiary 198,797 227,441
---------- ----------
Combined $1,095,033 $ 254,621
========== ==========
F-7
<PAGE>
Notes to Consolidated Financial Statements -- Continued
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note C -- Loans Payable to Stockholders and Affiliates
Stockholders of the Company, officers and affiliates of the Company made
multiple loans to the Company to fund working capital. Loans in the amount of
$218,636 and $117,123 at December 31, 1998 and 1997, respectively, have no
stated interest rate and are due on demand.
A stockholder of the Company loaned the Company $416,000 through December 31,
1998, of which $129,000 was outstanding at December 31, 1997. These loans are
secured by the assets of the Company. The notes accrue interest at ten percent
per annum. Interest is due monthly. The balance of accrued interest at December
31, 1998 was $61,677. The note plus accrued interest is due on April 30, 2001 or
upon an event of default, as defined, or a private placement or public offering.
Note D -- Provision for Income Taxes
No provision for income taxes have been recorded due to net operating loss
carryforwards totaling approximately $1,446,000 that will be offset against
future taxable income. Substantially all NOL carryforwards begin to expire in
the year 2017. No tax benefit has been reported in the financial statements
because the Company's future income is unpredictable. No federal tax expense has
been recognized for 1998 and 1997 due to loss carryforwards.
1998 1997
---------- ----------
Tax assets
NOL carryforwards $ 457,600 $ 112,500
Valuation allowance (457,600) (112,500)
---------- ----------
Total $ -0- $ -0-
========== ==========
Note E -- Stock Restrictions
Certain shares of common stock have been issued to officers or employees of the
Company. These shares are considered restricted for two years as to saleability.
Restricted shares totaled 10,937,250 at December 31, 1998 and 8,569,307 at
December 31, 1997.
Note F -- Leases
The Subsidiary leases office space and office equipment. The noncancelable
leases are accounted for as operating leases for financial reporting purposes.
Charges to rent expense for the years ended December 31, 1998 and 1997 are
$10,479 and $6,419, respectively.
F-8
<PAGE>
Notes to Consolidated Financial Statements -- Continued
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note F -- Leases -- Continued
At December 31, 1998, the future minimum lease payments from the operating
leases consisted of the following:
1999 $ 4,175
2000 5,675
2001 434
---------
$ 10,284
=========
Note G -- Loss on Abandoned Development
The Company engaged in Golf Course Development projects which were later
abandoned due to lack of financing. The loss on abandoned developments totaled
$200,000 and $106,770 during the years ended December 31, 1998 and 1997,
respectively.
Note H -- Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has minimal assets, has
lacked working capital for the past several years, and is dependent upon
financing to continue operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. Management
is currently seeking potential business acquisitions and/or business
opportunities.
Note I -- Subsequent Event
On January 26, 1999, the Company acquired one-hundred percent of common stock
(500 shares) of Pro's Edge Wholesale, Inc., a Florida corporation for $200,000.
In addition, the Company also acquired one-hundred percent of common stock (100
shares) of Golf Shoes Plus, Inc., a Florida corporation, for a total purchase
price of $907,400 in cash and stock. The cash requirement totaled $242,400 with
a down payment of $50,000 on the date of sale; and, the remaining $192,400 to be
paid over a six-month period beginning August 1, 1999. The stock requirement is
the number of restricted shares of common stock which shall be determined by
dividing the sum of $665,000 by the market value of each share on January 26,
1999. Pro's Edge Wholesale, Inc. and Golf Shoes Plus, Inc. sell golf supplies
and equipment.
In January 1999, the Company began an Internet auction website. Revenues will be
generated from bids and will be used to fund working capital.
F-9
<PAGE>
Notes to Consolidated Financial Statements -- Continued
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
Note I -- Subsequent Event -- Continued
On March 18, 1999, the Company purchased Briar & Wood, Inc., a magazine
publisher, for $250,000 plus $125,000 due on September 1, 1999 and $125,000 on
March 31, 2000. The Company is also required to pay a remaining amount based on
2001 earnings before interest, taxes, depreciation and amortization. The payment
range is based on earnings from zero to over $6,000,000 with multiples that
range from 3 to 6. The balance of the purchase shall be paid over a period
depending on the amount of the payout.
On March 31, 1999, the Company acquired Focused Media Limited (Focused) by
exchanging 300,000 shares of restricted common stock and $100,000 cash for
one-hundred percent of the shares of Focused.
F-10
<PAGE>
SUPPLEMENTARY INFORMATION
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
To the Stockholders of
Beverly Hills Limited, Inc.
(A Development Stage Company)
Our report on our audit of the consolidated financial statements of the Beverly
Hills Limited, Inc. (A Development Stage Company) for the years ended December
31, 1998 and 1997 appears on page 1. These audits were made for the purpose of
forming an opinion on the consolidated financial statements taken as a whole.
The consolidating information on Schedules 1 and 2 is presented for purposes of
additional analysis of the consolidated financial statements for 1998 and is not
a required part of the consolidated financial statements for 1998. Such
information has been subjected to the auditing procedures applied in the audits
of the consolidated financial statements and, in our opinion, is fairly stated
in all material respects in relation to the consolidated financial statements
taken as a whole.
/s/ SMITH & RADIGAN CPA'S, LLC
----------------------------------
Smith & Radigan CPA's, LLC
Atlanta, Georgia
July 6, 1999
F-12
<PAGE>
Consolidating Balance Sheet Schedule 1
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
HMW
Golf, Inc.
Beverly Hills d/b/a The Eliminating 1998
Limited, Inc. Hanlon Group Entries Total
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Advance to affiliate $ 91,803 $ -0- $ (91,803) $ -0-
PROPERTY AND EQUIPMENT
Office equipment 2,168 -0- -0- 2,168
Less allowance for depreciation 60 -0- -0- 60
----------- ----------- ----------- -----------
Net property and equipment 2,108 -0- -0- 2,108
OTHER ASSETS
Organization costs, net -0- 463 -0- 463
Investment (deficit) in
subsidiary (471,765) -0- 471,765 -0-
----------- ----------- ----------- -----------
(471,765) -0- 471,765 463
----------- ----------- ----------- -----------
$ (377,854) $ 463 $ 379,962 $ 2,571
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
CURRENT LIABILITIES
Cash (balance) overdraft $ 41,357 $ (47) $ -0- $ 41,310
Accrued interest 15,491 46,186 -0- 61,677
Accounts payable 48,782 -0- -0- 48,782
Advance from affiliate -0- 91,803 (91,803) -0-
Loans payable to stockholders 52,350 166,286 -0- 218,636
----------- ----------- ----------- -----------
Total current liabilities 157,980 304,228 (91,803) 370,405
LONG-TERM DEBT 248,000 168,000 -0- 416,000
STOCKHOLDERS' EQUITY (DEFICIENCY ASSETS)
Preferred stock, par value $0.001
per share:
Authorized -- 25,000,000 shares
Issued and outstanding --
-0- shares -0- -0- -0- -0-
Common stock, par value $0.001
per share:
Authorized -- 50,000,000 shares
Issued and outstanding -- 11,568,134 11,568 100 (100) 11,568
Additional paid-in capital 685,944 37,353 (37,353) 685,944
Retained deficit (accumulated
deficit during development
stage of $1,171,259) (1,481,346) (509,218) 509,218 (1,481,346)
----------- ----------- ----------- -----------
(783,834) (471,765) 471,765 (783,834)
----------- ----------- ----------- -----------
$ (377,854) $ 463 $ 379,962 $ 2,571
=========== =========== =========== ===========
</TABLE>
See Auditors' Report on Supplementary Information.
F-13
<PAGE>
Page 2
Consolidating Statement of Operations Schedule 2
BEVERLY HILLS LIMITED, INC.
(A Development Stage Company)
December 31, 1998
<TABLE>
<CAPTION>
HMW
Golf, Inc.
Beverly Hills d/b/a The Eliminating 1998
Limited, Inc. Hanlon Group Entries Total
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $ -0- $ -0- $ -0- $ -0-
OPERATING EXPENSES
Advertising -0- 6,020 -0- 6,020
Amortization and depreciation 60 232 -0- 292
Dues and subscriptions 547 350 -0- 897
Insurance 25,746 6,084 -0- 31,830
Licenses and permits 671 -0- -0- 670
Office expense 7,504 13,357 -0- 20,861
Professional fees 538,791 16,433 -0- 555,224
Rental expense 165 10,314 -0- 10,479
Interest 16,199 18,453 -0- 34,652
Travel and entertainment 74,285 112,499 -0- 186,784
Utilities 7,545 15,383 -0- 22,928
Taxes -0- 540 -0- 540
Miscellaneous 24,722 (867) -0- 23,855
----------- ----------- ----------- -----------
Total operating expense 696,235 198,797 -0- 895,032
----------- ----------- ----------- -----------
OPERATING LOSS (696,235) (198,797) -0- (895,032)
LOSS ON ABANDONED DEVELOPMENT (200,000) -0- -0- 200,000
LOSS FROM SUBSIDIARY (198,797) -0- 198,797 -0-
----------- ----------- ----------- -----------
NET LOSS (1,095,032) (198,797) 198,797 (1,095,032)
RETAINED EARNINGS (DEFICIT) AT
BEGINNING OF YEAR (386,314) (310,421) (310,421) (386,314)
----------- ----------- ----------- -----------
RETAINED EARNINGS (DEFICIT) AT
END OF YEAR $(1,481,346) $ (509,218) $ (509,218) $(1,481,346)
=========== =========== =========== ===========
</TABLE>
F-14
<PAGE>
BEVERLY HILLS LTD., INC.
Consolidated Balance Sheets
Unaudited
ASSETS
September
1999
CURRENT ASSETS
Cash in bank $ 201,809
Accounts receivable - net of $100,797 reserve 763,677
Inventories 483,555
-----------
TOTAL CURRENT ASSETS 1,449,041
-----------
PROPERTY & EQUIPMENT
Equipment 732,795
Less: allowance for depreciation 421,027
-----------
311,768
-----------
OTHER ASSETS
Prepaid advertising & other 5,518,638
Goodwill 4,247,129
Marketable security 55,000
Deposits & organization costs 4,709
-----------
9,825,476
-----------
$11,586,285
===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
CURRENT LIABILITIES
Accounts payable $ 2,232,066
Accrued expenses & unearned income 381,967
Current portion of notes payable 2,299,374
-----------
TOTAL CURRENT LIABILITIES 4,913,407
-----------
LONG TERM LIABILITIES
Notes payable 1,841,208
Deferred income taxes -28,161
-----------
1,813,047
-----------
Minority interest in subsidiary 515,000
-----------
STOCKHOLDER'S EQUITY (DEFICIENCY IN ASSETS)
Preferred stock, par value $0.001 per share
Authorized 25,000,000 shares 0
Common stock, par value $0.001 per
Authorized 50,000,000 shares
Issued and outstanding 12,503,000 & 11,568,000 12,503
Additional paid-in capital 7,547,743
Common stock subscriptions & options 180,272
Retained deficit -3,395,687
-----------
4,344,831
-----------
$11,586,285
===========
F-15
<PAGE>
BEVERLY HILLS LTD., INC.
Consolidated Statements of Operations
Unaudited
September
1999
REVENUES
Sale of golf related merchandise $ 951,988
Magazine & advertising sales & fees 299,223
Reservation service fees 204,738
Miscellaneous income 7,278
------------
Total revenues 1,463,227
------------
COST OF SALES
Cost of merchandise, tickets & internet service 766,459
Cost of Freight 22,433
Cost of commissions, payroll & taxes 446,382
------------
Total cost of sales 1,235,274
------------
GROSS PROFIT 227,953
------------
SALES & MARKETING
Advertising 23,334
Other marketing costs 482,946
------------
Total cost of sales & marketing 506,280
------------
GENERAL & ADMINISTRATIVE
Gen & Admin Payroll & Taxes 1,289,432
Professional fees - legal, accounting & consulting 1,012,396
Travel & entertainment 181,295
Other Gen & Admin Costs 107,226
------------
2,590,349
------------
OTHER COSTS
Insurance 40,881
Telephone 54,587
Utilities 16,194
Rent 155,709
Depreciation & amortization 110,855
------------
378,226
------------
3,474,855
------------
OPERATING LOSS BEFORE INTEREST &
NON-RECURRING ITEMS -3,246,902
Gain on sale of interest in subsidiary 1,485,000
Loss on abandoned projects 0
Profit on subs prior to acquisition 42,278
Interest expense 111,785
------------
NET LOSS $ -1,915,965
============
F-16
<PAGE>
BEVERLY HILLS LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
UNAUDITED
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK SUBSCRIPTIONS & OPTIONS
---------------------- -------------- ------------ ADDITIONAL PAID
NO. OF SHARES AMOUNT NO. OF SHARES AMOUNT IN CAPITAL
---------------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,1998 11,568,134 11,568 685,944
1st Qtr, 1999:
Golf Shoes Plus Acquisition 80,606 79 664,921
Stock issued for cash 1,062,000 1062 1,275,938
Stock issued for services 347,112 347 346,765
Stock subscribed for services 75,000 75 74,925
Focused Media Acquisition 300,000 300 2,474,700
Employee stock options 1644 1644
2nd Qtr, 1999:
Stock subscribed for services 5000 5 4995
Employee stock options 82,894 82,894
3rd Qtr, 1999:
Stock issued for services 1,088,790 1089
Stock subscribed for services 260,000 260 2,020,990
Employee stock options 95,394 95,394
Net loss for period ended 9/30/99
Amounts arising from foreign
currency fluctuations & consolidation -1942 -1435
--------------------- -------------- ------------ ---------------
Balance at September 30, 1999 14,446,642 12,503 519,932 180,272 7,547,743
====================== =============== ============ ===============
<CAPTION>
RETAINED
EARNINGS (DEFICIT) TOTAL
--------------------------------
<S> <C> <C>
Balance at December 31,1998 -1,481,346 -783,834
1st Qtr, 1999:
Golf Shoes Plus Acquisition 665,000
Stock issued for cash 1,277,000
Stock issued for services 347,112
Stock subscribed for services 75,000
Focused Media Acquisition 2,475,000
Employee stock options 1,644
2nd Qtr, 1999:
Stock subscribed for services 5,000
Employee stock options 82,894
3rd Qtr, 1999:
Stock issued for services 1,089
Stock subscribed for services 2,021,250
Employee stock options 95,394
Net loss for period ended 9/30/99 -1,915,965 -1,915,965
Amounts arising from foreign
currency fluctuations & consolidation 1624 -1,753
--------------------------------
Balance at September 30, 1999 -3,395,687 4,344,831
=================================
</TABLE>
F-17
<PAGE>
BEVERLY HILLS LTD., INC.
Statements of Cash Flows
Unaudited
September
1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ -1,915,965
Adjustments to reconcile net loss
to net cash provided by operating activities:
Common stock issued for services 2,629,383
Amortization & depreciation 420,967
(Increase) decrease in:
Accounts receivable -763,677
Inventories -483,555
Increase (decrease) in:
Accounts payable and accruals 2,475,413
------------
Total adjustments 4,278,531
------------
------------
Net cash used by operating activities 2,362,566
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash payments for equipment -730,627
Prepaid advertising costs -5,518,638
Goodwill -4,245,505
Marketable security -55,000
Cash deposit -4,246
------------
------------
Net cash used by investing activities -10,554,016
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Minority interest in subsidiary 515,000
Proceeds from stockholder loans 3,505,946
Common stock issued for acquisitions 3,136,623
Proceeds from issuance of common stock 1,277,000
------------
Net cash provided by financing activities 8,434,569
------------
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS 243,119
CASH AND CASH EQUIVALENTS ( OVERDRAFT)
AT THE BEGINNING OF YEAR -41,310
------------
CASH AND CASH EQUIVALENTS (OVERDRAFT)
AT THE END OF THE YEAR $ 201,809
============
F-18
AGREEMENT AND PLAN OF REORGANIZATION
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") among KEYNOTE
ACQUISITION CORPORATION, a Delaware corporation ("Keynote"), BEVERLY HILLS LTD.
INC., a Utah corporation ("Beverly Hills") and TPG Capital Corporation (the
"Shareholder"), being the owner of all of the issued and outstanding stock of
Keynote.
Whereas, Beverly Hills wishes to acquire and the Shareholder wishes to
transfer all of the issued and outstanding securities of Keynote in a
transaction intended to qualify as a reorganization within the meaning of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Now, therefore, Keynote, Beverly Hills and the Shareholder adopt this plan
of reorganization and agree as follows:
1. EXCHANGE OF STOCK
1.1. NUMBER OF SHARES. The Shareholder agrees to transfer to Beverly Hills
at the Closing (defined below) the number of shares of common stock of Keynote,
$.0001 par value per share, shown opposite their names in Exhibit A, in exchange
pro rata for an aggregate of 250,000 shares of voting common stock of Beverly
Hills, $.001 par value per share.
1.2. EXCHANGE OF CERTIFICATES. Each holder of an outstanding certificate or
certificates theretofore representing shares of Keynote common stock shall
surrender such certificate(s) for cancellation to Beverly Hills, and shall
receive in exchange a certificate or certificates representing the number of
full shares of Beverly Hills common stock into which the shares of Keynote
common stock represented by the certificate or certificates so surrendered shall
have been converted. The transfer of Keynote shares by the Shareholder shall be
effected by the delivery to Beverly Hills at the Closing of certificates
representing the transferred shares endorsed in blank or accompanied by stock
powers executed in blank, signature guaranteed.
1.3. FRACTIONAL SHARES. Fractional shares of Beverly Hills common stock
shall not be issued, but in lieu thereof Beverly Hills shall round up fractional
shares to the next highest whole number.
1.4. FURTHER ASSURANCES. At the Closing and from time to time thereafter,
the Shareholder shall execute such additional instruments and take such other
action as Beverly Hills may request in order more effectively to sell, transfer,
and assign the transferred stock to Beverly Hills and to confirm Beverly Hills's
title thereto.
2. RATIO OF EXCHANGE
The securities of Keynote owned by the Shareholder, and the relative
securities of Beverly Hills for which they will be exchanged, are set out
opposite their names in Exhibit A.
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AGREEMENT AND PLAN OF REORGANIZATION
- --------------------------------------------------------------------------------
3. CLOSING
3.1. TIME AND PLACE. The Closing contemplated herein shall be held as soon
as possible at the offices of Cassidy & Associates at 1504 R Street, NW,
Washington, D.C. unless another place or time is agreed upon in writing by the
parties without requiring the meeting of the parties hereof. All proceedings to
be taken and all documents to be executed at the Closing shall be deemed to have
been taken, delivered and executed simultaneously, and no proceeding shall be
deemed taken nor documents deemed executed or delivered until all have been
taken, delivered and executed. The date of Closing may be accelerated or
extended by agreement of the parties.
3.2. FORM OF DOCUMENTS. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission required by this Agreement
or any signature required thereon may be used in lieu of an original writing or
transmission or signature for any and all purposes for which the original could
be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or
transmission or original signature.
4. UNEXCHANGED CERTIFICATES
Until surrendered, each outstanding certificate that prior to the Closing
represented Keynote common stock shall be deemed for all purposes, other than
the payment of dividends or other distributions, to evidence ownership of the
number of shares of Beverly Hills common stock into which it was converted. No
dividend or other distribution shall be paid to the holders of certificates of
Keynote common stock until presented for exchange at which time any outstanding
dividends or other distributions shall be paid.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants as follows:
5.1. TITLE TO SHARES. The Shareholder is the owner, free and clear of any
liens and encumbrances, of the number of Keynote shares which are listed in the
attached schedule and which they have contracted to exchange and the transfer of
the Keynote shares to Beverly Hills contemplated hereby will vest complete
record and beneficial ownership of such shares in Beverly Hills.
5.2. LITIGATION. There is no litigation or proceeding pending, or to any
Shareholder's knowledge threatened, against or relating to shares of Keynote
held by the Shareholders.
6. REPRESENTATIONS AND WARRANTIES OF KEYNOTE
Keynote represents and warrants that:
6.1. CORPORATE ORGANIZATION AND GOOD STANDING. Keynote is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and is qualified to do business as a foreign corporation in
each jurisdiction, if any, in which its property or business requires such
qualification.
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6.2. REPORTING COMPANY STATUS. Keynote has filed with the Securities and
Exchange Commission ("Commission") a registration statement on Form 10-SB which
became effective pursuant to the Securities Exchange Act of 1934 and is a
reporting company pursuant to ss.12(g) thereunder. It has received a letter from
the staff of the Commission indicating that they "have no further comments" on
the filings that have been made by Keynote.
6.3. REPORTING COMPANY FILINGS. Keynote has timely filed and is current on
all reports required to be filed by it pursuant to ss.13 of the Securities
Exchange Act of 1934. None of such filings, as of the date filed, contains a
material misstatement of fact or omits to state a fact which is material.
6.4. CAPITALIZATION. Keynote's authorized capital stock consists of
100,000,000 shares of Common Stock, $.0001 par value, of which 5,000,000 shares
are issued and outstanding, and 20,000,000 shares of Preferred Stock, of which
no shares are issued or outstanding.
6.5. ISSUED STOCK. All the outstanding shares of its Common Stock are duly
authorized and validly issued, fully paid and non-assessable.
6.6. STOCK RIGHTS. There are no stock grants, options, rights, warrants or
other rights to purchase or obtain Keynote common or preferred stock issued or
committed to be issued.
6.7. CORPORATE AUTHORITY. Keynote has all requisite corporate power and
authority to own, operate and lease its properties, to carry on its business as
it is now being conducted and to execute, deliver, perform and conclude the
transactions contemplated by this Agreement and all other agreements and
instruments related to this agreement.
6.8. AUTHORIZATION. Execution of this agreement has been duly authorized
and approved by Keynote's board of directors.
6.9. SUBSIDIARIES. Keynote has no subsidiaries.
6.10. FINANCIAL STATEMENTS. Keynote's financial statements dated as of June
7, 1999 copies of which will have been delivered by Keynote to Beverly Hills
prior to the Closing Date (the "Keynote Financial Statements"), fairly present
the financial condition of Keynote as of the date therein and the results of its
operations for the periods then ended in conformity with generally accepted
accounting principles consistently applied.
6.11. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected or
reserved against in the Keynote Financial Statements, Keynote did not have at
that date any liabilities or obligations (secured, unsecured, contingent, or
otherwise) of a nature customarily reflected in a corporate balance sheet
prepared in accordance with generally accepted accounting principles.
6.12. NO MATERIAL CHANGES. Except as set out by attached schedule, there
has been no material adverse change in the business, properties, or financial
condition of Keynote nor has it incurred any liabilities except in the ordinary
course of its buinsess since the date of the Keynote Financial Statements.
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6.13. LITIGATION. Except as set out by attached schedule, there is not, to
the knowledge of Keynote, any pending, threatened, or existing litigation,
bankruptcy, criminal, civil, or regulatory proceeding or investigation,
threatened or contemplated against Keynote or against any of its officers.
6.14. CONTRACTS. Except as set out by attached schedule, Keynote is not a
party to any material contract not in the ordinary course of business that is to
be performed in whole or in part at or after the date of this agreement.
6.15. TITLE. Except as set out by attached schedule, Keynote has good and
marketable title to all the real property and good and valid title to all other
property included in the Keynote Financial Statements. Except as set out in the
balance sheet thereof, the properties of Keynote are not subject to any
mortgage, encumbrance, or lien of any kind except minor encumbrances that do not
materially interfere with the use of the property in the conduct of the business
of Keynote .
6.16. TAX RETURNS. Except as set out by attached schedule, all required tax
returns for federal, state, county, municipal, local, foreign and other taxes
and assessments have been properly prepared and filed by Keynote for all years
for which such returns are due unless an extension for filing any such return
has been filed. Any and all federal, state, county, municipal, local, foreign
and other taxes and assessments, including any and all interest, penalties and
additions imposed with respect to such amounts have been paid or provided for.
The provisions for federal and state taxes reflected in the Keynote Financial
Statements are adequate to cover any such taxes that may be assessed against
Keynote in respect of its business and its operations during the periods covered
by the Keynote Financial Statements and all prior periods.
6.17. NO VIOLATION. The Closing will not constitute or result in a breach
or default under any provision of any charter, bylaw, indenture, mortgage,
lease, or agreement, or any order, judgment, decree, law, or regulation to which
any property of Keynote is subject or by which Keynote is bound.
7. REPRESENTATIONS AND WARRANTIES OF BEVERLY HILLS
Beverly Hills represents and warrants that:
7.1. CORPORATE ORGANIZATION AND GOOD STANDING. Beverly Hills is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Utah and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
7.2. CAPITALIZATION. As of January 25, 2000, Beverly Hills's authorized
capital stock consists of 50,000,000 shares of common stock, $.001 par value, of
which 15,325,957 shares are issued and outstanding, and 25,000,000 shares of
preferred stock, $.001 par value, of which 1,500,000 shares have been designated
Series A and 1,500,000 shares Series B. There are no outstanding shares of
Series A and there are 20,000 outstanding shares of Series B preferred,
respectively.
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7.3. NUMBER OF SHAREHOLDERS. Beverly Hills represents that, as of January
25, 2000, it has more than 200 shareholders of record and as of the week ended
December 3, 1999, Depository Trust reports that 96 of its participants held 100
or more shares for the benefit of its participants.
7.4. ISSUED STOCK. Except as set forth in the attached schedule, all the
outstanding shares of its common stock are duly authorized and validly issued,
fully paid and non-assessable.
7.5. STOCK RIGHTS. Except as set out by attached schedule, there are no
stock grants, options, rights, warrants or other rights to purchase or obtain
Beverly Hills common or preferred stock issued or committed to be issued.
7.6. CORPORATE AUTHORITY. Except as set forth in the attached schedule,
Beverly Hills has all requisite corporate power and authority to own, operate
and lease its properties, to carry on its business as it is now being conducted
and to execute, deliver, perform and conclude the transactions contemplated by
this Agreement and all other agreements and instruments related to this
agreement.
7.7. AUTHORIZATION. At or prior to Closing, the execution of this agreement
shall have been duly authorized and approved by Beverly Hills's board of
directors.
7.8. SUBSIDIARIES. As set out in the schedule attached hereto, Beverly
Hills has six subsidiaries.
7.9. FINANCIAL STATEMENTS. Beverly Hills's unaudited financial statements
dated as of December 31, 1998 financial statements and interim unaudited
statements for the nine month period ended September 30, 1999, copies of which
will have been delivered by Beverly Hills to Keynote prior to the Closing Date
(the "Beverly Hills Financial Statements"), fairly present the financial
condition of Beverly Hills as of their respective dates and the results of its
operations for the periods then ended in conformity with generally accepted
accounting principles consistently applied, except as set forth in the schedule
attached hereto.
7.10. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected or
reserved against in the Beverly Hills Financial Statements or as set forth in
the attached schedule, Beverly Hills did not have at that date any liabilities
or obligations (secured, unsecured, contingent, or otherwise) of a nature
customarily reflected in a corporate balance sheet prepared in accordance with
generally accepted accounting principles.
7.11. NO MATERIAL CHANGES. Except as set out by attached schedule, there
has been no material adverse change in the business, properties, or financial
condition of Beverly Hills since the date of the Beverly Hills Financial
Statements.
7.12. LITIGATION. Except as set out by attached schedule, there is not, to
the knowledge of Beverly Hills, any pending, threatened, or existing litigation,
bankruptcy, criminal, civil, or regulatory proceeding or investigation,
threatened or contemplated against Beverly Hills or against any of its officers.
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<PAGE>
7.13. CONTRACTS. Except as set out by attached schedule, Beverly Hills is
not a party to any material contract not in the ordinary course of business that
is to be performed in whole or in part at or after the date of this agreement.
7.14. TITLE. Except as set out by attached schedule, Beverly Hills has good
and marketable title to all the real property and good and valid title to all
other property included in the Beverly Hills Financial Statements. Except as set
out in the balance sheet thereof, the properties of Beverly Hills are not
subject to any mortgage, encumbrance, or lien of any kind except minor
encumbrances that do not materially interfere with the use of the property in
the conduct of the business of Beverly Hills.
7.15. TAX RETURNS. Except as set out by attached schedule, all required tax
returns for federal, state, county, municipal, local, foreign and other taxes
and assessments have been properly prepared and filed by Beverly Hills for all
years for which such returns are due unless an extension for filing any such
return has been filed. Any and all federal, state, county, municipal, local,
foreign and other taxes and assessments, including any and all interest,
penalties and additions imposed with respect to such amounts have been paid or
provided for. The provisions for federal and state taxes reflected in the
Beverly Hills Financial Statements are adequate to cover any such taxes that may
be assessed against Beverly Hills in respect of its business and its operations
during the periods covered by the Beverly Hills Financial Statements and all
prior periods.
7.16. NO VIOLATION. The Closing will not constitute or result in a breach
or default under any provision of any charter, bylaw, indenture, mortgage,
lease, or agreement, or any order, judgment, decree, law, or regulation to which
any property of Beverly Hills is subject or by which Beverly Hills is bound.
8. CONDUCT PENDING THE CLOSING
Keynote, Beverly Hills and the Shareholders covenant that between the date
of this Agreement and the Closing as to each of them:
8.1. No change will be made in the charter documents, by-laws, or other
corporate documents of Keynote.
8.2. Keynote will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will not
enter into any material commitment except in the ordinary course of business.
8.3. No change will be made in the charter documents, by-laws, or other
corporate documents of Beverly Hills.
8.4. Beverly Hills will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and will not
enter into any material commitment except in the ordinary course of business.
8.5. None of the Shareholders will sell, transfer, assign, hypothecate,
lien, or otherwise dispose or encumber the Keynote shares of common stock owned
by them.
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9. CONDITIONS PRECEDENT TO OBLIGATION OF THE SHAREHOLDERS
The Shareholder's obligation to consummate this exchange shall be subject
to fulfillment on or before the Closing of each of the following conditions,
unless waived in writing by the Shareholders as appropriate:
9.1. BEVERLY HILLS'S REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Beverly Hills set forth herein shall be true and correct at
the Closing as though made at and as of that date, except as affected by
transactions contemplated hereby.
9.2. BEVERLY HILLS'S COVENANTS. Beverly Hills shall have performed all
covenants required by this Agreement to be performed by it on or before the
Closing.
9.3. BOARD OF DIRECTOR APPROVAL. This Agreement shall have been approved by
the Board of Directors of Beverly Hills.
9.4. SUPPORTING DOCUMENTS OF BEVERLY HILLS. Beverly Hills shall have
delivered to the Shareholders the following documents in form and substance
reasonably satisfactory to the Shareholders:
(a) A good standing certificate from the jurisdiction of Beverly Hills's
organization stating that Beverly Hills is a corporation duly organized, validly
existing, and in good standing;
(b) Secretary's certificate stating that Beverly Hills's authorized capital
stock is as set forth herein;
(c) Certified copies of the resolutions of the board of directors of
Beverly Hills authorizing the execution of this Agreement and the consummation
hereof;
(d) Secretary's certificate of incumbency of the officers and directors of
Beverly Hills;
(e) Beverly Hills's Financial Statements; and
(f) Any document as may be specified herein or required to satisfy the
conditions, representations and warranties enumerated elsewhere herein.
10. CONDITIONS PRECEDENT TO OBLIGATION OF BEVERLY HILLS
Beverly Hills' obligation to consummate this exchange shall be subject to
fulfillment on or before the Closing of each of the following conditions, unless
waived in writing by Beverly Hills:
10.1. SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Shareholders set forth herein shall be true and correct at the
Closing as though made at and as of that date, except as affected by
transactions contemplated hereby.
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10.2. SHAREHOLDERS' COVENANTS. The Shareholders shall have performed all
covenants required by this Agreement to be performed by them on or before the
Closing.
10.3. KEYNOTE'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Keynote set forth herein shall be true and correct at the Closing
as though made at and as of that date, except as affected by transactions
contemplated hereby.
10.4. KEYNOTE'S COVENANTS. Keynote shall have performed all covenants
required by this Agreement to be performed by them on or before the Closing.
10.5. BOARD OF DIRECTOR APPROVAL. This Agreement shall have been approved
by the Board of Directors of Keynote.
10.6. SUPPORTING DOCUMENTS OF KEYNOTE. Keynote shall have delivered to the
Shareholders the following documents in form and substance reasonably
satisfactory to the Shareholders:
(a) A good standing certificate from the jurisdiction of Keynote's
organization stating that Keynote is a corporation duly organized, validly
existing, and in good standing;
(b) Secretary's certificate stating that Keynote's authorized capital stock
is as set forth herein;
(c) Certified copies of the resolutions of the board of directors of
Keynote authorizing the execution of this Agreement and the consummation hereof;
(d) Secretary's certificate of incumbency of the officers and directors of
Keynote;
(e) Keynote's Financial Statements;
(f) All original books and records of Keynote form its date of
incorporation to the date of closing, including, without limitation, its banking
records and corporate minute book, which shall contain minutes of all of the
proceedings on the part of Keynote's directors and shareholder.
(g) Any document as may be specified herein or required to satisfy the
conditions, representations and warranties enumerated elsewhere herein.
11. SHAREHOLDER REPRESENTATIVE
The Shareholders hereby irrevocably designate and appoint Cassidy &
Associates, 1504 R Street, N.W. Washington, District of Columbia 20009, as their
agent and attorney in fact (the "Shareholders' Representative") with full power
and authority until the Closing to execute, deliver, and receive on their behalf
all notices, requests, and other communications hereunder; to fix and alter on
their behalf the date, time, and place of the Closing; to waive, amend, or
modify any provisions of this Agreement, and to take such other action on their
behalf in connection with this Agreement, the Closing, and the transactions
contemplated hereby as such agent or agents deem appropriate; provided, however,
that no such waiver, amendment, or modification
8
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may be made if it would decrease the number of shares to be issued to the
Shareholders hereunder or increase the extent of their obligation to indemnify
Reorganization hereunder.
12. TERMINATION
This Agreement may be terminated (1) by mutual consent in writing; (2) by
the Shareholder, Beverly Hills or Keynote if there has been a material
misrepresentation or material breach of any warranty or covenant by any other
party; or (3) by the Shareholder, Beverly Hills or Keynote if the Closing shall
not have taken place within 15 days following execution of this Agreement,
unless adjourned to a later date by mutual consent in writing.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The covenants, representations and warranties of the Shareholder, Beverly
Hills and Keynote set out herein shall survive the Closing.
14. ARBITRATION
14.1. SCOPE. The parties hereby agree that any and all claims (except only
for requests for injunctive or other equitable relief) whether existing now, in
the past or in the future as to which the parties or any affiliates may be
adverse parties, and whether arising out of this agreement or from any other
cause, will be resolved by arbitration before the American Arbitration
Association within the District of Columbia.
14.2. CONSENT TO JURISDICTION, SITUS AND JUDGEMENT. The parties hereby
irrevocably consent to the jurisdiction of the American Arbitration Association
and the situs of the arbitration (and any requests for injunctive or other
equitable relief) within the District of Columbia. Any award in arbitration may
be entered in any domestic or foreign court having jurisdiction over the
enforcement of such awards.
14.3. APPLICABLE LAW. The law applicable to the arbitration and this
agreement shall be that of the State of Delaware, determined without regard to
its provisions which would otherwise apply to a question of conflict of laws.
14.4. DISCLOSURE AND DISCOVERY. The arbitrator may, in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to any
matters which are the subject of the arbitration and to compel compliance with
such disclosure and discovery order. The arbitrator may order the parties to
comply with all or any of the disclosure and discovery provisions of the Federal
Rules of Civil Procedure, as they then exist, as may be modified by the
arbitrator consistent with the desire to simplify the conduct and minimize the
expense of the arbitration.
14.5. RULES OF LAW. Regardless of any practices of arbitration to the
contrary, the arbitrator will apply the rules of contract and other law of the
jurisdiction whose law applies to the arbitration so that the decision of the
arbitrator will be, as much as possible, the same as if the dispute had been
determined by a court of competent jurisdiction.
14.6. FINALITY AND FEES. Any award or decision by the American Arbitration
Association shall be final, binding and non-appealable except as to errors of
law or the failure of
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the arbitrator to adhere to the arbitration provisions contained in this
agreement. Each party to the arbitration shall pay its own costs and counsel
fees except as specifically provided otherwise in this agreement.
14.7. MEASURE OF DAMAGES. In any adverse action, the parties shall restrict
themselves to claims for compensatory damages and\or securities issued or to be
issued and no claims shall be made by any party or affiliate for lost profits,
punitive or multiple damages.
14.8. COVENANT NOT TO SUE. The parties covenant that under no conditions
will any party or any affiliate file any action against the other (except only
requests for injunctive or other equitable relief) in any forum other than
before the American Arbitration Association, and the parties agree that any such
action, if filed, shall be dismissed upon application and shall be referred for
arbitration hereunder with costs and attorney's fees to the prevailing party.
14.9. INTENTION. It is the intention of the parties and their affiliates
that all disputes of any nature between them, whenever arising, whether in
regard to this agreement or any other matter, from whatever cause, based on
whatever law, rule or regulation, whether statutory or common law, and however
characterized, be decided by arbitration as provided herein and that no party or
affiliate be required to litigate in any other forum any disputes or other
matters except for requests for injunctive or equitable relief. This agreement
shall be interpreted in conformance with this stated intent of the parties and
their affiliates.
14.10. SURVIVAL. The provisions for arbitration contained herein shall
survive the termination of this agreement for any reason.
15. GENERAL PROVISIONS
15.1. FURTHER ASSURANCES. From time to time, each party will execute such
additional instruments and take such actions as may be reasonably required to
carry out the intent and purposes of this agreement.
15.2. WAIVER. Any failure on the part of either party hereto to comply with
any of its obligations, agreements, or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
15.3. BROKERS. Each party agrees to indemnify and hold harmless the other
party against any fee, loss, or expense arising out of claims by brokers or
finders employed or alleged to have been employed by the indemnifying party.
15.4. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first-class certified mail, return receipt requested, or recognized
commercial courier service, as follows:
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If to Keynote, to:
Keynote Corporation
1504 R Street, N.W.
Washington, District of Columbia 20009
If to Beverly Hills, to:
Beverly Hills Ltd., Inc.
16 North Ft. Harrison
Clearwater, Florida 33755
With a required copy to:
Sommer & Schneider LLP
595 Stewart Avenue, Suite 710
Garden City, NY 11530
If to the Shareholder, to:
Cassidy & Associates
1504 R Street, N.W.
Washington, District of Columbia 20009
Such notices will be deemed given when delivered in the case of a courier
service or three days after mailing.
15.5. GOVERNING LAW. This agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware.
15.6. ASSIGNMENT. This agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment by either party of its rights under this agreement
without the written consent of the other party shall be void.
15.7. COUNTERPARTS. This agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures sent by
facsimile transmission shall be deemed to be evidence of the original execution
thereof.
15.8. EXCHANGE AGENT AND CLOSING DATE. The Exchange Agent shall be the law
firm of Cassidy & Associates, Washington, D.C. The Closing shall take place upon
the fulfillment by each party of all the conditions of Closing required herein,
but not later than 15 days following execution of this agreement unless extended
by mutual consent of the parties.
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15.9. REVIEW OF AGREEMENT. Each party acknowledges that it has had time to
review this agreement and, as desired, consult with counsel. In the
interpretation of this agreement, no adverse presumption shall be made against
any party on the basis that it has prepared, or participated in the preparation
of, this agreement.
15.10. SCHEDULES. All schedules attached hereto, if any, shall be
acknowledged by each party by signature or initials thereon and shall be dated.
15.11. EFFECTIVE DATE. This effective date of this agreement shall be
January 27, 2000.
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SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
AMONG KEYNOTE, BEVERLY HILLS AND THE SHAREHOLDERS OF KEYNOTE
IN WITNESS WHEREOF, the parties have executed this agreement.
KEYNOTE ACQUISITION CORPORATION
By /s/ JAMES M. CASSIDY
--------------------------------
James M. Cassidy
BEVERLY HILLS LTD., INC.
By /s/ MARC BARHONOVICH
--------------------------------
Marc Barhonovich, President
THE SHAREHOLDER OF KEYNOTE
ACQUISITION CORPORATION:
TPG CAPITAL CORPORATION
By /s/ JAMES M. CASSIDY
--------------------------------
James M. Cassidy, President
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Exhibit A
---------
Number of Number of
Keynote Shares Beverly Hills Name of
To Be Shares To Be Shareholder Address
Exchanged Received
5,000,000 250,000 TPG Capital Corporation 1504 R St. NW,
Washington DC 20009
- --------------------------------------------------------------------------------
BEVERLY HILLS LTD., INC.
16 N. FT. HARRISON
CLEARWATER, FL 33755
February 17, 2000
Keynote Acquisition Corporation
1504 R Street, NW
Washington, D.C. 20009
-and-
TPG Capital Corporation
1504 R Street, NW
Washington, D.C. 20009
Re: Agreement and Plan of Reorganization
Gentlemen:
We refer you to the above referenced agreement (the "Agreement") which was
executed by us on January 27, 2000, but not accepted and executed by you until
the date of this letter. Capitalized terms used in this letter shall have the
meanings assigned to them in the Agreement, unless otherwise defined herein.
The parties hereby agree to amend the Agreement as follows:
Section 15.11 of the Agreement is amended to read as follows:
"15.11 Effective Date. The effective date of this Agreement shall be
February 23, 2000."
Except as modified by this amendment, all other provisions of the Agreement
shall remain in full force and effect.
Please sign and date this amendment in the spaces provided on the following
page to confirm our mutual understandings and agreements as set forth in this
letter and return a singed copy to the undersigned.
Very truly yours,
BEVERLY HILLS LTD., INC.
By: /s/ MARC S. BARHONOVICH
-----------------------
Marc S. Barhonovich
<PAGE>
Page 2 to Letter Amendment to Agreement and Plan of Reorganization
Acknowledged and Agreed to:
TPG CAPITAL CORPORATION
By: /s/ JAMES M. CASSIDY
---------------------------------
James M. Cassidy, President
2/23/2000
Date:
-------------------------------
KEYNOTE ACQUISITION CORPORATION
By: /s/ James M. Cassidy
-------------------------------
James M. Cassidy, President
2/23/2000
Date:
-------------------------------
ARTICLES OF AMENDMENT AND RESTATEMENT
Pursuant to the provisions of Utah law, the undersigned corporation hereby
amends and restates its Articles of Incorporation, and for that purpose, submits
the following statement:
1. The name of the corporation is Beverly Hills Ltd., Inc.
2. The text of each amendment is as set forth in the attached Amended and
Restated Articles of Incorporation.
3. The amendments do not provide for any increase, exchange,
reclassification or cancellation of authorized or issued shares.
4. The date of adoption of the amendment was January 11, 2000.
5. The amendments were approved by a sufficient number of shareholders as
follows:
(a) The holders of 14,814,042 shares of outstanding common stock were
the only class of shares entitled to vote for the amendments.
(b) There were present at the Special Meeting, in person or by proxy,
the holders of 8,302,191 shares of common stock.
(c) The holders of 8,302,191 shares of common stock voted in favor of
the amendment, being a majority of the outstanding shares.
BEVERLY HILLS LTD., INC.
By: /s/ MARC BARHONOVICH
--------------------------------
Marc Barhonovich, President
Dated: January 13, 2000
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BEVERLY HILLS LTD., INC.
ARTICLE I - NAME
The name of the corporation is Beverly Hills Ltd., Inc.
ARTICLE II - PURPOSES AND POWERS
The purpose of the corporation is to engage in any lawful act or activity for
which corporations may be organized under the Utah Revised Business Corporation
Act. The corporation shall have all of the rights, powers and privileges now or
hereafter conferred upon corporations organized under the Utah Revised Business
Corporation Act. The corporation may do everything necessary, suitable or proper
for the accomplishment of any of its corporate purposes.
ARTICLE III - SHARES
The total number of shares of capital stock which the corporation shall have
authority to issue is seventy five million (75,000,000) of which twenty five
million (25,000,000) shall be shares of preferred stock, $.001 par value
(hereinafter called the "Preferred Stock"), and fifty million (50,000,000) shall
be shares of common stock, $.001 par value (hereinafter called the "Common
Stock").
The designation, powers, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
of each class of stock, and the express grant of authority to the board of
directors to amend these Articles of Incorporation to fix the designation,
powers, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of each share
of the Preferred Stock which are not fixed by these Articles of Incorporation,
are as follows:
A. PREFERRED STOCK
1. Number; Series. The Preferred Stock may be issued in one or more series,
from time to time, with each such series to have such designation, powers,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in an amendment to these Articles of Incorporation providing for the
issue of such series. The board of directors of the corporation is hereby
expressly vested with authority to amend the Articles of Incorporation, without
shareholder action or approval, to: (a) create one or more series of the
Preferred Stock, fix the number of shares of each such series (within the total
number of authorized shares of the Preferred Stock
<PAGE>
available for designation as a part of such series), and designate and
determine, in whole or part, the preferences, limitations, and relative rights
of each series of the Preferred Stock; (b) alter or revoke the preferences,
limitations and relative rights granted to or imposed upon any wholly unissued
series of the Preferred Stock; or (c) increase or decrease the number of shares
constituting any series of the Preferred Stock (the number of shares of which
was originally fixed by the board of directors) either before or after the
issuance of shares of the series, provided that the number may not be decreased
below the number of shares of such series then outstanding, or increased above
the total number of authorized shares of the Preferred Stock available for
designation as a part of such series. Without limiting the foregoing, the
authority of the board of directors with respect to each such series shall
include, but not be limited to, the determination or fixing of the following:
(i) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the board
of directors in creating such series) be increased or decreased (but
not below the number of shares then outstanding) from time to time by
like action of the board of directors;
(ii) The dividend rate of such series, the conditions and times upon which
such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes of
stock or series thereof, or on the other series of the same class, and
whether dividends shall be cumulative or noncumulative;
(iii) The conditions upon which the shares of such series shall be subject
to redemption by the corporation and the times, prices and other terms
and provisions upon which the shares of the series may be redeemed;
(iv) Whether or not the shares of the series shall be subject to the
operation of retirement or sinking fund provisions to be applied to
the purchase or redemption of such shares and, if such retirement or
sinking fund be established, the annual amount thereof and the terms
and provisions relative to the operation thereof;
(v) Whether or not the shares of the series shall be convertible into or
exchangeable for shares of any other class or classes, with or without
par value, or of any other series of the same class and, if provision
is made for conversion or exchange, the times, prices, rates,
adjustments and other terms and conditions of such conversion or
exchange;
(vi) Whether or not the shares of the series shall have voting rights, in
addition to the voting rights provided by law, and, if so, subject to
the limitations hereinafter set forth, the terms of such voting
rights;
(vii) The rights of the shares of the series in the event of voluntary or
involuntary liquidation, dissolution or upon distribution of assets of
the corporation;
<PAGE>
(viii) Any other powers, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such series, as the board of
directors may deem advisable.
2. Dividends. The holders of the shares of the Preferred Stock of each
series shall be entitled to receive, when and as declared by the board of
directors, out of the funds legally available for the payment of dividends,
dividends at the rate fixed by the board of directors for such series for the
current period and, if cumulative, for all prior periods for which such
dividends are cumulative.
Whenever, at any time, dividends on the then outstanding Preferred Stock as may
be required with respect to any series outstanding shall have been paid or
declared and set apart for payment on the then outstanding Preferred Stock, and
after complying with respect to any retirement or sinking fund or funds for all
applicable series of the Preferred Stock, the board of directors may, subject to
the provisions of the resolution or resolutions creating the series of the
Preferred Stock, declare and pay dividends on the Common Stock as provided in
paragraph B.1. of this Article III, and the holders of shares of the Preferred
Stock shall not be entitled to share therein, except as otherwise provided in
the amendment creating any series.
3. Liquidation; Dissolution. The holders of the Preferred Stock of each
series shall be entitled upon liquidation or dissolution of the corporation to
such preferences as are provided in the amendment creating such series of the
Preferred Stock, and no more, before any distribution of the assets of the
corporation shall be made to the holders of shares of the Common Stock. Whenever
the holders of shares of the Preferred Stock shall have been paid the full
amounts to which they shall be entitled, the holders of shares of the Common
Stock shall be entitled to share in all assets of the corporation remaining as
provided in paragraph B.2. of this Article III. If, upon such liquidation,
dissolution or winding up, the assets of the corporation distributable as
aforesaid among the holders of the Preferred Stock of all series shall be
insufficient to permit full payment to them of said preferential amounts, then
such assets shall be distributed ratably among such holders in proportion to the
respective total amounts which they shall be entitled to receive as provided in
this paragraph A.3.
4. Voting. Except as otherwise provided by an amendment to the Articles of
Incorporation creating any series of the Preferred Stock or by the general
corporation law of Utah, the Common Stock issued and outstanding shall have and
possess the exclusive power to vote for the election of directors and for all
other purposes as provided in paragraph B.3. of this Article III.
5. Preemptive Rights. Except as may be provided in the amendment adopted by
the board of directors providing for the issue of any series of the Preferred
Stock, no holder of shares of the Preferred Stock shall, as such holder, be
entitled as of right to subscribe for, purchase or receive any part of any new
or additional issue of stock of any class, whether now or hereafter authorized,
or of bonds, debentures or other securities convertible into or exchangeable for
stock, but all such additional shares of stock of any class, or bonds,
debentures or other securities convertible into or exchangeable for stock, may
be issued and disposed of by the board of directors on such terms and for such
consideration, so far as may be permitted by law, and to such persons, as the
board of directors in its absolute discretion may deem advisable.
<PAGE>
6. Prior Designations. The designations, powers, conversion privileges,
preferences and other special rights and the qualifications, limitations or
restrictions thereon, set forth with respect to 1,500,000 Series A Preferred
Stock and 1,500,000 shares of Series B Preferred Stock shall be as set forth in
an Amendment to the Articles of Incorporation filed June 29, 1998, which is
incorporated herein by reference, except that the first clause of the second
sentence of Article IV.B.7a is corrected to read as follows:
"To determine the number of fully paid and non-assessable shares of Common Stock
(calculated to the nearest 1/10,000th of a share) that shall be issuable upon
such conversion, 75% of the BID PRICE (such capitalized term being hereinafter
defined) of a single share of Common Stock shall be divided into the Stated
Value of a single share of Series B Stock and the resulting quotient (the
"CONVERSION FACTOR") shall be multiplied by the number of shares of Series B
Stock that are to be converted. The Bid Price of a single share of Common Stock
shall be determined as follows"
B. COMMON STOCK
1. Dividends. Subject to the rights of the holders of the Preferred Stock,
and subject to any other provisions of the Articles of Incorporation, holders of
the Common Stock shall be entitled to receive such dividends and other
distributions in cash, stock or property of the corporation as may be declared
thereon by the board of directors from time to time out of assets or funds of
the corporation legally available therefor.
2. Liquidation; Dissolution. In the event of any liquidation, dissolution
or winding up of the affairs of the corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and other
liabilities of the corporation and after payment or provision for payment to the
holders of each series of the Preferred Stock of all amounts required in
accordance with paragraph A.3. of this Article III, the remaining assets and
funds of the corporation shall be divided among and paid to the holders of the
Common Stock.
3. Voting.
(a) At every meeting of the shareholders of the corporation, every holder
of the Common Stock shall be entitled to one vote in person or by
proxy for each share of such Common Stock standing in his name on the
stock transfer records of the corporation.
(b) No shareholder shall have the right to cumulate votes in the election
of directors.
4. Preemptive Rights. No holder of shares of the Common Stock of the
corporation shall, as such holder, be entitled as of right to subscribe for,
purchase or receive any part of any new or additional issue of stock of any
class, whether now or hereafter authorized, or of bonds, debentures or other
securities convertible into or exchangeable for stock, but all such additional
shares of stock of any class, or bonds, debentures or other securities
convertible into or exchangeable for stock, may be issued and disposed of by the
board of directors on such terms
<PAGE>
and for such consideration, so far as may be permitted by law, and to such
persons, as the board of directors in its absolute discretion may deem
advisable.
ARTICLE IV - DIRECTORS
The number of directors of the corporation shall be as determined by resolution
of the board of directors, but shall not be less than three (3) nor more than
nine (9).
The personal liability of any director to the corporation or to its shareholders
for monetary damages for any action taken or any failure to take any action, as
a director, is hereby eliminated to the fullest extent permitted by Utah laws.
In the event the applicable Utah law or this Article IV is repealed or amended
to decrease or limit in any manner the protection or rights available to
directors hereunder, such repeal or amendment shall not be retroactively applied
in determining the personal liability of a director pursuant to this Article IV
prior to the enactment of such amendment.
ARTICLE V - REGISTERED OFFICE AND AGENT
The street address of the corporation's registered office and the name and
signature of the corporation's registered agent at that office are:
16 N. Ft. Harrison
Clearwater, FL 33755
Leon F. Willis, Jr.
ARTICLE VI - INDEMNIFICATION OF OFFICERS AND DIRECTORS
The corporation shall indemnify 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, employee benefit plan or other enterprise to
the fullest extent permitted by the Utah Revised Business Corporation Act, as
the same may hereafter be amended, or as otherwise permitted by law.
ARTICLE VII - EXISTENCE
The Corporation's existence shall be perpetual.
ARTICLE VIII - EFFECT OF AMENDED AND RESTATED ARTICLES OF
INCORPORATION
<PAGE>
These amended and restated Articles of Incorporation supersede the original
Articles of Incorporation of the corporation and, except as set forth herein,
all amendments and revisions thereto and restatements thereof.
AMENDED AND RESTATED BYLAWS OF
BEVERLY HILLS LTD., INC.
ARTICLE I -- PURPOSES
SECTION 1.01 Purpose. This corporation is organized for any and all lawful
purposes for which corporations may be organized under the Utah Revised Business
Corporation Act, as amended, as set forth in the corporation's Articles of
Incorporation.
ARTICLE II -- OFFICES
SECTION 2.01 Offices. The principal office of the corporation may be located at
any place, either in or outside the State of Utah, as designated in the
corporation's most current Annual Report filed with the Utah Division of
Corporations and Commercial Code. The corporation may have such other offices,
either in or outside the State of Utah, as the board of directors may designate
or as the business of the corporation may require from time to time. The
corporation shall maintain at its principal office a copy of certain records, as
specified in Section 16-10a-1601 of the Utah Revised Business Corporation Act.
SECTION 2.02 Registered Office. The registered office of the corporation,
required by Section 16-10a-501 of the Utah Revised Business Corporation Act,
shall be located in the State of Utah and may be, but need not be, identical
with the corporation's principal office (if located in the State of Utah). The
address of the registered office may be changed from time to time.
ARTICLE III -- SHAREHOLDERS
SECTION 3.01 Annual Meeting. The corporation shall hold an annual meeting of
shareholders at such time, date and place as the board of directors shall
determine, for the purpose of electing directors and for the transaction of such
other business as may come before the meeting.
SECTION 3.02 Special Meeting. The corporation shall hold a special meeting of
the shareholders:
(i) on call of its board of directors or the chairman of the board of
directors; or
(ii) if the holders of shares representing at least ten percent (10%) of
all the votes entitled to be cast on any issue that is proposed to be
considered at a special meeting sign, date and deliver to the
corporation's secretary one or more written demands for the meeting,
stating the purpose or purposes for which it is to be held.
SECTION 3.03 Place of Meetings. The board of directors may designate any place,
either in or outside the State of Utah, as the place at which any annual or
special meeting is to be held. If no designation is made, the meeting shall be
held at the corporation's principal office.
<PAGE>
SECTION 3.04 Action Without a Meeting.
(a) Action by Written Consent. Any action required or permitted to be taken
at a meeting of the shareholders may be taken without a meeting and without
prior notice if one or more consents in writing, setting forth the action so
taken, are signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take the action
at a meeting at which all shares entitled to vote thereon were present and
voted.
(b) Notice of Action. Unless the written consents of all shareholders
entitled to vote have been obtained, notice of any shareholder approval without
a meeting shall be given at least ten (10) days before the consummation of the
action authorized by the approval to:
(i) those shareholders entitled to vote who have not consented in writing;
and
(ii) those shareholders not entitled to vote and to whom the Utah Revised
Business Corporation Act requires that notice of the proposed action
be given.
The notice must contain or be accompanied by the same material that, under
the Utah Revised Business Corporation Act and these Bylaws, would have been
required to be sent in a notice of meeting at which the proposed action would
have been submitted to the shareholders for action.
(c) Withdrawal of Consent. Any shareholder giving a written consent or the
shareholder's proxyholder, or a transferee of the shares or a personal
representative of the shareholder or their respective proxyholder, may revoke
the consent by a signed writing describing the action and stating that the
shareholder's prior consent is revoked, if the writing is received by the
corporation prior to the effectiveness of the action.
(d) Effective Date of Action. An action taken pursuant to this Section 3.04
is not effective unless all written consents on which the corporation relies for
the taking of an action pursuant to subsection (a) are received by the
corporation within a sixty (60) day period and not revoked pursuant to
subsection (c). Action taken pursuant to this Section 3.04 is effective as of
the date the last written consent necessary to effect the action is received by
the corporation, unless all of the written consents necessary to effect the
action specify a later date as the effective date of the action, in which case
the later date shall be the effective date of the action. If the corporation has
received written consents as contemplated by subsection (a) signed by all
shareholders entitled to vote with respect to the action, the effective date of
the action may be any date that is specified in all the written consents as the
effective date of the action.
(e) Election of Directors. Notwithstanding subsection (a), directors may
not be elected by written consent except by unanimous written consent of all
shares entitled to vote for the election of directors.
(f) Record Date. If not otherwise determined under Section 3.06 of these
Bylaws, the record date for determining shareholders entitled to take action
without a meeting or entitled to
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<PAGE>
be given notice under subsection (b) of action so taken is the date the first
shareholder delivers to the corporation a writing upon which the action is taken
pursuant to subsection (a).
SECTION 3.05 Notice of Meeting.
(a) Notice Required. The corporation shall give notice to shareholders of
the date, time and place of each annual and special shareholders' meeting no
fewer than ten (10) nor more than sixty (60) days before the meeting date.
Notice shall be deemed effective at the earlier of (i) 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; (ii) on the date shown on the return receipt if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee; (iii) when received; or (iv) five (5) days after
deposit in the United States mail mailed postpaid and correctly addressed to an
address other than that shown in the corporation's current record of
shareholders.
(b) Exception to Notice Requirement. Notwithstanding any requirement in
these Bylaws or elsewhere that notice be given, the corporation shall not be
required to give notice to any shareholder to whom:
(i) a notice of two (2) consecutive annual meetings, and all notices
of meetings during the period between the two (2) consecutive
annual meetings, have been mailed, addressed to the shareholder
at the shareholder's address as shown on the corporation's
records, and have been returned undeliverable; or
(ii) at least two (2) payments, if sent by first class mail, of
dividends or interest on securities during a twelve (12) month
period, have been mailed, addressed to the shareholder at the
shareholder's address as shown on the records of the corporation,
and have been returned undeliverable.
(c) Contents of Notice.
(i) The notice of every shareholders' meeting must state the place,
day and time of the meeting.
(ii) Notice of an annual meeting need not include a description of the
purpose or purposes for which the meeting is called, except for
those matters specified by law or these Bylaws for which specific
notice must be given.
(iii) Notice of a special meeting must include a description of the
purpose or purposes for which the meeting is called.
(iv) If a purpose of any shareholder meeting is to consider either (1)
a proposed amendment of the Articles of Incorporation (including
any restated Articles requiring shareholder approval); (2) a plan
of merger or share exchange; (3) the sale, lease, exchange or
other disposition of all, or substantially all of the
corporation's property; (4) the dissolution of the corporation;
or (5) the removal of a director, the notice must so state and
3
<PAGE>
be accompanied by respectively a copy or summary of the (1)
amendment; (2) plan of merger or share exchange; and (3) a
description of the transaction involving the disposition of all
or substantially all the corporation's property. If the proposed
corporate action creates dissenters' rights under Part 13 of the
Utah Revised Business Corporation Act, the notice must state that
shareholders are, or may be, entitled to assert dissenters'
rights, and must be accompanied by a copy of such Part 13.
(d) Waiver of Notice. A shareholder may waive any notice required by these
Bylaws, before or after the date and time stated in the notice as the date or
time when any action will occur or has occurred. The waiver must be in writing,
be signed by the shareholder entitled to the notice, and be delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
(e) Waiver by Attendance. A shareholder's attendance at a meeting:
(i) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the
meeting because of lack of notice or defective notice; and
(ii) in the case of a special meeting, waives objection to
consideration of a particular matter at the meeting that is not
within the purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is
presented.
SECTION 3.06 Record Date for Meetings and Other Actions.
(a) Fixing of Record Date. The board of directors by resolution may fix a
record date in order to determine the shareholders entitled to receive notice of
a shareholders' meeting, and to determine the shareholders who are entitled to
take action without a meeting, to demand a special meeting, to vote, or to take
any other action. Such record date may not be more than seventy (70) days before
the meeting or action requiring the determination of shareholders.
(b) Default Record Date. If the board of directors does not fix a record
date, the record date for determining shareholders entitled to notice of and to
vote at an annual or special shareholders' meeting is the close of business on
the date before the first notice is delivered to shareholders.
(c) Adjournment. A determination of shareholders entitled to notice of or
to vote at a shareholders' meeting is effective for any adjournment of the
meeting unless the board of directors fixes a new record date, which it must do
if the meeting is adjourned to a date more than one hundred twenty (120) days
after the date fixed for the original meeting,
SECTION 3.07 Record Date of Dividends and Other Distributions. The board of
directors may fix a future date as the record date for determining shareholders
entitled to dividends and other distributions, other than one involving a
purchase, redemption, or other acquisition of the
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<PAGE>
corporation's shares. If the board of directors does not fix a record date, the
record date is the date the board of directors authorizes the distribution.
SECTION 3.08 Meetings by Telecommunication. Shareholders may participate in a
meeting by, or the meeting may be conducted through the use of, conference
telephone or similar means of communication by which all persons participating
in the meeting can hear one another during the meeting. A shareholder
participating in a meeting by this means is considered to be present at the
meeting.
SECTION 3.09 Voting Lists.
(a) Requirements for Voting List. After fixing a record date for a
shareholders' meeting, the corporation shall prepare a list of the names of all
its shareholders who are entitled to be given notice of the meeting. The list
must be arranged by voting group, and within each voting group by class or
series of shares. The list must be alphabetical within each class or series and
must show the address of, and the number of shares held by, each shareholder.
(b) Inspection of Voting List Prior to a Meeting. The shareholders' list
must be available for inspection by any shareholder, beginning on the earlier of
ten (10) days before the meeting for which the list was prepared or two (2)
business days after notice of the meeting is given and continuing through the
meeting and any meeting adjournments, at the corporation's principal office of
at a place identified in the meeting notice in the city in which the meeting
will be held.
(c) Inspection of Voting List at the Meeting. The corporation shall make
the shareholders' list available at the meeting, and any shareholder, or any
shareholder's agent or attorney is entitled to inspect the list at any time
during the meeting or any adjournment, for any purpose germane to the meeting.
d) Effect on Meeting. The corporation's refusal or failure to prepare or
make available the shareholders' list does not affect the validity of action
taken at the meeting.
SECTION 3.10 Proxies.
(a) Manner of Voting. At all meetings of shareholders, a shareholder may
vote his or her shares in person or by proxy.
(b) Appointment of Proxy. A shareholder may appoint a proxy by signing an
appointment form, either personally or by the shareholder's attorney in fact.
(c) Effective Date. A proxy is effective when received by the corporation.
(d) Term. A proxy is valid for eleven (11) months unless a longer period is
expressly provided in the appointment form.
(e) Revocation. An appointment of a proxy is revocable by the shareholder,
and is revoked upon the death or incapacity of the shareholder (upon receipt of
notice of either event by the secretary or other officer or agent authorized to
tabulate votes before the proxy exercises the
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authority under the appointment), unless the appointment form conspicuously
states that it is irrevocable and the appointment is coupled with an interest.
SECTION 3.11 Voting Entitlement of Shares. Each outstanding share is entitled to
vote is entitled to one (1) vote upon each matter submitted to a vote at a
meeting of shareholders.
SECTION 3.12 Quorum. Shares entitled to vote at a meeting may take action on a
matter at a meeting only if a quorum of those shares exists with respect to that
matter. A majority of the votes entitled to be cast on a matter constitutes a
quorum for action on that matter. Once a quorum is present, it shall be deemed
to continue for the remainder of the meeting and for any adjournment of that
meeting, unless a new record date is or must be set for that adjourned meeting.
SECTION 3.13 Vote Required to Take Action for Other than Election of Directors.
If a quorum exists, action on a matter, other than the election of directors, is
approved if the votes cast favoring the action exceed the votes cast opposing
the action, except where a greater number of affirmative votes is otherwise
required by law.
SECTION 3.14 Voting for Directors.
(a) Manner of Voting. At each election of directors, every shareholder
entitled to vote at the election has the right to cast, in person, or by proxy,
all of the votes to which the shareholders shares are entitled for as many
persons as there are directors to be elected and for whose election the
shareholder has the right to vote. Shareholders shall not have a right to
cumulate their votes for the election of directors.
(b) Vote Required. Directors are elected by a plurality of the votes cast
by the shares entitled to vote in the election, at a meeting of shareholders at
which a quorum is present.
SECTION 3.15 Conduct of Meetings. The board of directors may adopt by resolution
such rules and regulations for the conduct of meetings of shareholders as it
shall deem appropriate. Except to the extent inconsistent with such rules and
regulations adopted by the board of directors, the chair of any meeting of
shareholders shall have the right and authority to prescribe such rules,
regulations and procedures and to all such acts as, in the judgment of the
chair, are appropriate for the conduct of the meeting. Such rules, regulations
and procedures, whether adopted by the board of directors or prescribed by the
chair, may include, without limitation, the following: (a) the establishment of
an agenda or order of business for the meeting, (b) rules and procedures for
maintaining order at the meeting and the safety of those present, (c)
limitations on attendance at or participation in the meeting to shareholders of
record, their duly authorized and constituted proxies or such other persons as
the chair of the meeting shall determine, (d) restrictions on entry to the
meeting after the time fixed for commencement thereof, and (e) limitations on
the time allotted to questions or comments by participants. Unless and to the
extent determined by the board of directors or the chair of the meeting,
meetings of shareholders shall not be required to be held in accordance with the
rules of parliamentary procedure.
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<PAGE>
ARTICLE IV -- BOARD OF DIRECTORS
SECTION 4.01 General Powers. The business and affairs of the corporation shall
be managed under the direction of its board of directors.
SECTION 4.02 Number. The number of directors of the corporation shall be not
less than three (3) nor more than ten (10), with the exact number of directors
within such parameters to be set by resolution of the board of directors from
time to time; provided that no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director.
SECTION 4.03 Chair. One (1) director may be designated by a majority of the full
board of directors as chair of the board. The chair of the board shall preside
at all meetings of the board of directors.
SECTION 4.04 Election. The directors shall be elected at each annual meeting of
the shareholders. If the directors are not elected at an annual meeting, or if
an annual meeting is not held, then the directors may be elected at any special
meeting of the shareholders held for that purpose.
SECTION 4.05 Term. The terms of the initial directors of the corporation expire
at the first shareholders' meeting at which directors are elected. The terms of
all other directors expire at the next annual shareholders' meeting following
their election. Despite the expiration of a director's term, the director shall
continue to serve until the election and qualification of a successor or until
there is a decrease in the number of directors, or until such director's earlier
death, resignation or removal from office.
SECTION 4.06 Qualifications. Directors need not be residents of the State of
Utah or shareholders of the corporation.
SECTION 4.07 Resignation. Any director of the corporation may resign at any time
by giving written notice to the corporation. A resignation is effective when the
notice is received by the corporation unless the notice specifies a later
effective date.
SECTION 4.08 Removal.
(a) Shareholders' Right to Remove Directors. The shareholders may remove
one or more directors with or without cause. A director may be removed only at a
meeting called for that purpose.
(b) Notice Requirement. The notice of the meeting at which a director is to
be removed must state that the purpose, or one of the purposes, of the meeting
is to remove the director.
(c) Vote Required. A director may be removed only if the number of votes
cast to remove the director exceeds the number of votes cast against removal.
SECTION 4.09 Vacancies. Any vacancy occurring among the directors, including a
vacancy resulting from an increase in the number of directors, may be filled by
the affirmative vote of a
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majority of the remaining directors, although less than a quorum, or by the
shareholders. A director elected to fill a vacancy shall be elected for the
unexpired term of his or her predecessor in office.
SECTION 4.10 Compensation. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a fixed sum for attendance at each
meeting of the board of directors or stated salaries as directors. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be paid like compensation (including their expenses) for
attending committee meetings.
SECTION 4.11 Regular Meetings. By resolution, the board of directors may
determine the time and place, either within or without the State of Utah, for
the holding of regular meetings without other notice than such resolution.
SECTION 4.12 Special Meetings. Special meetings of the board of directors may be
called by or at the request of the chairman of the board or fifty percent (50%)
or more of the 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 Utah as the place for holding any special meeting of the board of
directors called by them.
SECTION 4.13 Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the board of directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all of the
directors. Such consent has the same force and effect as a unanimous vote of the
directors. Action taken under this provision is effective at the time the last
director signs a writing describing the action taken, unless, prior to that
time, any director has revoked a consent by a writing signed by the director and
received by the secretary or any other person authorized by the Bylaws or the
board of directors to receive the revocation, or unless the consent specifies a
different effective time.
SECTION 4.14 Notice of Special Meetings. Notice of any special meeting shall be
given at least one (1) day prior to the date of the meeting. Notice must be in
writing unless oral notice is reasonable under the circumstances. Notice may be
communicated in person, by any form of electronic communication or by mail or
private carrier. The notice need not describe the purpose of the special
meeting, unless otherwise required by law or these Bylaws. Notice will
conclusively be deemed to have been given and shall be effective when personally
delivered (by private carrier or otherwise); or if given by mail, on the fifth
day after being sent by first class, registered or certified mail; or if given
by telecopy, facsimile or other electronic means, when confirmation of
transmission is indicated by the sender's machine or device.
SECTION 4.15 Waiver of Notice.
(a) Written Waiver. Any director may waive notice of any meeting before or
after the date and time of the meeting stated in the notice. Except as provided
in subsection (b) below, the waiver must be in writing and signed by the
director entitled to notice. The waiver shall be delivered to the corporation
for filing with the corporate records, but delivery and filing are not
conditions to its effectiveness.
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(b) Waiver by Attendance. The attendance of a director at or participation
in a meeting waives any required notice to the director of the meeting unless
the director at the beginning of the meeting, or promptly upon the director's
arrival, objects to the holding of the meeting or the transacting of business at
the meeting because of lack of notice or defective notice, and does not
thereafter vote for or assent to action taken at the meeting.
SECTION 4.16 Quorum. A majority of the number of directors fixed by Section 4.02
of these Bylaws constitutes a quorum for the transaction of business at any
meeting of the board of directors.
SECTION 4.17 Manner of Acting. The act of a majority of the directors present at
a meeting at which a quorum is present is the act of the board of directors.
Voting by proxy is not permitted.
SECTION 4.18 Meetings by Telecommunication. The board of directors may permit
any or all directors to participate in a regular or special meeting by, or
conduct the meeting through the use of, any means of communication by which all
directors participating may hear each other during the meeting. A director
participating in a meeting by this means is considered present in person at the
meeting.
SECTION 4.19 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 is presumed to have assented to the action taken unless:
(i) the director objects at the beginning of the meeting, or promptly
upon arrival, to holding the meeting or transacting business at
the meeting and does not thereafter vote for or assent to any
action taken at the meeting;
(ii) the director contemporaneously requests that his dissent or
abstention as to any specific action be entered into the minutes
of the meeting; or
(iii) the director causes written notice of a dissent or abstention as
to any specific action to be received by the presiding officer of
the meeting before adjournment of the meeting or by the
corporation promptly after adjournment of the meeting.
The right of dissent under this Section as to a specific action shall not
be available to a director who votes in favor of the action taken.
ARTICLE V -- COMMITTEES
SECTION 5.01 Creation of Committees. The board of directors by resolution
adopted by a majority of the number of directors fixed by Section 4.02 of these
Bylaws may appoint such committees from time to time, either standing or ad hoc,
as it deems necessary or appropriate, including but not limited to an executive
committee as described in Section 5.05 below.
SECTION 5.02 Membership. Each committee shall consist of not less than two (2)
directors, who shall serve at the pleasure of the board of directors.
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SECTION 5.03 Notice, Etc. Sections 4.08 through 4.16 of these Bylaws, which
govern meetings, actions without meetings, notice, waiver of notice, and quorum
and voting requirements of the board of directors, shall apply to committees and
their members, as well.
SECTION 5.04 Authority. Each committee shall have and may exercise all the
authority specified in the resolution by which it is created, except that no
committee shall have any authority to adopt a plan of merger or consolidation,
to recommend to the shareholders the sale, lease or other disposition of all or
substantially all of the property or as of the corporation other than in the
usual and regular course of its business, to recommend to the shareholders a
voluntary dissolution of the corporation, or to amend the Bylaws of the
corporation.
SECTION 5.05 Executive Committee. The executive committee of the board of
directors, if created pursuant to Section 5.01 of these Bylaws, shall consist of
two (2) or more directors. When the board of directors is not in session, the
executive committee shall have and may exercise all of the authority of the
board of directors except to the extent, if any, that such authority shall be
limited by the resolution appointing the executive committee, and except as
limited by Section 5.04 of these Bylaws.
ARTICLE VI -- OFFICERS
SECTION 6.01 Number. The corporation shall have such officers as may be
determined by the board of directors, and may include a president, a vice
president, a secretary, and a treasurer, each of whom shall be appointed by the
board of directors. One or more additional vice presidents (the number to be
determined by the board of directors) and such other officers and assistant
officers and agents as may be deemed necessary may also be appointed by the
board of directors. The board of directors may delegate to any officer of the
corporation or any committee of the board of directors the power to appoint
remove and prescribe the duties of such other officers, assistant officers,
agents and employees. Any two (2) or more offices may be held by the same
person.
SECTION 6.02 Appointment and Term of Office. The officers of the corporation
shall be appointed by the board of directors or by any officer to whom or
committee of the board of directors to which the power of appointment has been
delegated. Each officer shall hold office until such officer's successor has
been appointed or until such officer's death or until such officer shall resign
or shall have been removed in the manner provided below. The appointment of an
officer shall not itself create any contract rights with the corporation.
SECTION 6.03 Removal. Any officer, assistant, agent or employee may be removed,
with or without cause, at any time by the board of directors, or by any officer
to whom or committee of the board of directors to which such power of removal
has been delegated but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
SECTION 6.04 Resignation. An officer may resign at any time by giving written
notice of resignation to the corporation. A resignation of an officer is
effective when it is received by the corporation, unless the notice specifies a
later effective date. An officer's resignation does not affect the corporation's
contract rights, if any, with the officer.
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SECTION 6.05 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the board of directors
or by any officer to whom or committee of the board of directors to which such
power has been delegated.
SECTION 6.06 The Chairman of the Board. The chairman of the board, unless
otherwise specified by the board of directors, shall be the chief executive
officer of the corporation and, under the direction of the board of directors,
shall in general supervise and control all the business and affairs of the
corporation. The chairman of the board shall, when present, preside at all
meetings of the shareholders and at meetings of the board of directors. The
chairman of the board may hire, prescribe the duties of, and fire employees, and
may delegate such authority in whole or in part to any other officer or
employee. The chairman of the board may sign, with the secretary or any other
proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, and any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except 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 incident to the office of chief executive officer and such other duties
as may be prescribed by the board of directors from time to time.
SECTION 6.07 The President. The president is the chief operating officer of the
corporation and has, subject to the direction of the chairman of the board, if
any, general supervision, direction and control of the day-to-day operations of
the business and officers of the corporation. The president has the general
powers and duties as may be prescribed by the board of directors. The president
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the board of directors, certificates for shares of the
corporation, and any deeds, mortgages, bonds, contracts, or other instruments
which the board of directors has authorized to be executed, except 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. In
the absence of a chairman of the board, or if there is no chairman of the board,
the president shall, in addition, be the chief executive officer of the
corporation and shall have the powers and duties described in Section 6.06
herein.
SECTION 6.08 The Vice President. In the absence of the president, or in the
event of the president's death, inability or refusal to act, the vice president
(or in the event there is more than one vice president, the vice presidents in
the order designated by the board of directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the president, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the president. Any vice president may sign, with
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 6.09 The Secretary. The secretary shall (a) keep the minutes of the
shareholders' and of the board of directors' meetings 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 affix such
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seal to documents when authorized; (d) keep a register of the address of each
shareholder which shall be furnished to the secretary by such shareholder; (e)
sign with the chairman of the board, president, or a vice president,
certificates for 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; (g) maintain the records
required under Section 16-10a-1601 of the Utah Revised Business Corporation Act;
and (h) in general, perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to him or her by the
president or by the board of directors. In the absence of a secretary and any
assistant secretaries, the president shall perform these duties.
SECTION 6.10 The Treasurer. If required by the board of directors, the treasurer
shall give a bond for the faithful discharge of his or her duties in such sum
and with such surety or sureties as the board of directors shall determine. He
or she 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 Section
8.04 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. In the
absence of a treasurer, the secretary shall perform such duties.
SECTION 6.11 Assistant Secretaries and Assistant Treasurers. The assistant
secretaries, when authorized by the board of directors, may sign with the
chairman of the board, 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 treasurers shall
respectively, if required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the board of
directors shall determine. The assistant secretaries and assistant treasurer, 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 6.12 Compensation. The compensation of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such compensation by reason of the fact that he or she is also a
director of the corporation.
ARTICLE VII -- CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 7.01 Certificates for Shares.
(a) Shareholder's Right to a Certificate; Contents. Shares may but need not
be represented by certificates. Unless required by law, the rights and
obligations of shareholders are not affected by whether or not their shares are
represented by certificates. Notwithstanding anything herein to the contrary,
every owner of shares of stock of the corporation may request to have a
certificate or certificate, in a form approved by the board of directors,
certifying the number and class and series of shares of the stock of the
corporation owned by such shareholder. Such certificates shall be consecutively
numbered in the order in which they are issued.
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(b) Signatures. Each certificate shall be signed by the chairman of the
board or the president or a vice president and by the secretary or an assistant
secretary, or by such other officers as may be designated from time to time by
the board of directors. Any or all of the signatures on the certificates may be
a facsimile. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon, any such certificate, shall
cease to hold such office or position before the certificate is issued, the
certificate may nevertheless be issued by the corporation with the same effect
as if the person who signed the certificate, or whose facsimile signature has
been placed on the certificate, still held such office or position at the date
of issue.
(c) Shareholder Register. A record shall be kept of the names and addresses
of the persons and entities owning the capital stock of the corporation, the
number and class and series of shares represented by each stock certificate, and
the date thereof, and when canceled, the date of cancellation. Every certificate
surrendered to the corporation for exchange or transfer must be canceled, and no
new certificate or certificates may be issued in exchange for any existing
certificate until the existing certificate has been canceled, except in cases
provided for in Section 7.05.
SECTION 7.02 Transfers of Stock. Transfers of shares of stock of the corporation
shall be made only on the books of the corporation by the registered holder of
such shares, or by such holder's attorney as authorized by a power of attorney
duly executed and filed with the secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 7.04, upon surrender of the
certificate or certificates representing such shares properly endorsed for
transfer or when proper instructions with respect to the transfer of
uncertificated shares are received by the transfer agent appointed as provided
in Section 7.04. The person in whose name shares of stock stand on the books of
the corporation shall be deemed the owner of such shares for all purposes as
regards the corporation. Whenever any transfer of shares is made for collateral
security, and not absolutely, such fact shall be indicated in the entry of
transfer if, when the certificate or certificates are presented to the
corporation for transfer, both the transferor and the transferee request the
corporation to do so.
SECTION 7.03 Regulations. The board of directors may make such rules and
regulations as it deems expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates representing
shares of the corporation's capital stock.
SECTION 7.04 Transfer Agent. The board of directors may appoint, or authorize
any officer or officers to appoint, one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 7.05 Lost, Stolen, Destroyed, and Mutilated Certificates. If any stock
certificate is lost, stolen, destroyed, or mutilated, the corporation may issue
another certificate in its place upon proof of such loss, theft, destruction, or
mutilation and upon receipt by the corporation of a bond of indemnity in such
form and for such amount as the board of directors may direct; provided,
however, that a new certificate may be issued without requiring any bond when
the board of directors determines that it is proper.
SECTION 7.06 Legends. Each stock certificate shall contain such legend or other
statements as may be required by the Utah Revised Business Corporation Act, the
Utah Uniform Securities
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Act, the federal securities laws, and any agreement between the corporation and
the applicable shareholder. Failure to comply with the requirements of this
Section 7.06 shall not affect the validity of any certificate of stock which is
otherwise issued in accordance with the provisions of this Article VII.
ARTICLE VIII -- CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 8.01 Contracts. The board of directors may authorize any officer or
officers, or agent or agents, to enter into any 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 8.02 Loans. No loans may be contracted on behalf of the corporation and
no promissory notes or other evidences of indebtedness may 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. No loan may be made by the
corporation secured by its unissued shares.
SECTION 8.03 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 officers, or agent or
agents, of the corporation as may from time to time be determined by resolution
of the board of directors.
SECTION 8.04 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 depositaries as the board of directors may select.
ARTICLE IX -- DIVIDENDS
SECTION 9.01 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 the corporation's Articles
of Incorporation.
ARTICLE X -- INDEMNIFICATION
SECTION 10.01 Definitions. As used in this Article X:
(a) "Corporation" includes any domestic or foreign entity that is a
predecessor of the corporation by reason of a merger or other transaction in
which the predecessor's existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
corporation or an individual who, while a director of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee fiduciary, or agent of another corporation or other person or of an
employee benefit plan. A director is considered to be serving an employee
benefit plan at the corporation's request if his or her duties to the
corporation also impose duties on, or otherwise involve services by, him or her
to the plan or to participants in or beneficiaries
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of the plan. "Director" includes, unless the context requires otherwise, the
estate or personal representative of a director.
(c) "Expenses" include counsel fees.
(d) "Liability" means the obligation incurred with respect to a proceeding
to pay a judgment, settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan), or reasonable expenses.
(e) "Officer," "employee," fiduciary," and "agent" include any person who,
while serving the indicated relationship to the corporation, is or was serving
at the corporation's request as a director, officer, partner, trustee, employee,
fiduciary, or agent of another corporation or other person or of an employee
benefit plan. An officer, employee, fiduciary, or agent is considered to be
serving an employee benefit plan at the corporation's request if the person's
duties to the corporation also impose duties on, or otherwise involve services
by, that person to the plan or participants in, or beneficiaries of the plan.
Unless the context requires otherwise, such terms include the estates or
personal representatives of such persons.
(f) "Official capacity" means:
(i) when used with respect to a director, the office of director in
the corporation; and
(ii) when used with respect to a person other than a director, as
contemplated in Section 10.07, the office in the corporation held
by the officer of the employment, fiduciary, or agency
relationship undertaken by him or her on behalf of the
corporation,
"Official capacity" does not include service for any other corporation,
other person, or employee benefit plan.
(g) "Party" includes an individual who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.
(h) "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
SECTION 10.02 Authority to Indemnify Directors.
(a) Except as provided in Subsection 10.02(d), the corporation shall
indemnify an individual made a party to a proceeding because he or she is or was
a director, against liability incurred in the proceeding if:
(i) his or her conduct was in good faith; and
(ii) he or she reasonably believed that his or her conduct was in, or
not opposed to, the corporation's best interests; and
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(iii) in the case of any criminal proceeding, he or she had no
reasonable cause to believe his conduct was unlawful.
(b) A director's conduct with respect to any employee benefit plan for a
purpose he or she reasonably believed to be in or not opposed to the interests
of the participants in and beneficiaries of the plan is conduct that satisfies
the requirement of Subsection 10.02(a)(ii).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(d) The corporation may not indemnify a director under this section:
(i) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(ii) in connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in his or her official capacity, in which
proceeding he or she was adjudged liable on the basis that he or
she derived an improper personal benefit.
(e) Indemnification permitted under this Section 10.02 in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
SECTION 10.03 Mandatory Indemnification of Directors. The corporation shall
indemnify a director who was successful, on the merits or otherwise, in the
defense of any proceeding, or in the defense of any claim, issue, or matter in
the proceeding, to which he or she was a party because he or she is or was a
director of the corporation, against reasonable expenses incurred by him or her
in connection with the proceeding or claim with respect to which he or she has
been successful.
SECTION 10.04 Advance of Expenses for Directors.
(a) The corporation shall pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
(i) the director furnishes the corporation a written affirmation of
his or her good faith belief that he or she has met the
applicable standard of conduct described in Section 10.02;
(ii) the director furnishes to the corporation a written undertaking,
executed personally or on his or her behalf, to repay the advance
if it is ultimately determined that he or she did not meet the
standard of conduct; and
(iii) a determination is made that the facts then known to those
making the determination would not preclude indemnification under
this part.
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(b) The undertaking required by Subsection 10.04(a)(ii) must be an
unlimited general obligation of the director but need not be secured and shall
be accepted without reference to financial ability to make repayment.
(c) Determination of payments under this section shall be made in the
manner specified in Section 10.06.
SECTION 10.05 Court-Ordered Indemnification of Director. A director of the
corporation who is or was a party to a proceeding may apply for indemnification
to the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any notice
the court considers necessary, may order indemnification in the following
manner:
(a) if the court determines that the director is entitled to mandatory
indemnification, in which case the court shall also order the corporation to pay
the director's reasonable expenses incurred to obtain court-ordered
indemnification; and
(b) if the court determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances, whether
or not the director met the applicable standard of conduct set forth in Section
10.02 or was adjudged liable as described in Subsection 10.02(d), the court may
order indemnification as the court determines to be proper, except that the
indemnification with respect to any proceeding in which liability has been
adjudged in the circumstances described in Subsection 10.02(d) is limited to
reasonable expenses incurred.
SECTION 10.06 Determination of Indemnification of Directors.
(a) A corporation may not advance expenses to a director under Section
10.04 until after the written affirmation and undertaking required by Subsection
10.04(a)(ii) are received and the determination required by Subsection
10.04(a)(iii) has been made.
(b) The determinations required by Subsection 10.06(a) shall be made:
(i) by the board of directors by a majority vote of those present at
a meeting at which a quorum is present, and only those directors
not parties to the proceeding shall be counted in satisfying the
quorum; or
(ii) If a quorum cannot be obtained as contemplated in Subsection
10.06(b)(i), by a majority vote of a committee of the board of
directors designated by the board of directors, which committee
shall consist of two or more directors not parties to the
proceeding, except that directors who are parties to the
proceeding may participate in the designation of directors for
the committee; or
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(iii) by special legal counsel:
(1) selected by the board of directors or its committee in the
manner prescribed in Subsections 10.06(b)(i) and (ii); or
(2) if a quorum of the board of directors cannot be obtained
under Subsection 10.06(b)(i) and a committee cannot be
designated under Subsection 10.06(b)(ii), selected by a
majority vote of the full board of directors, in which
selection directors who are parties to the proceeding may
participate; or
(iv) by the shareholders, by a majority of the votes entitled to be
cast by holders of qualified shares (as defined in the Utah
Revised Business Corporation Act) present in person or by proxy
at a meeting.
(c) A majority of the votes entitled to be cast by the holders of all
qualified shares constitutes a quorum for purposes of action that complies with
this section. Shareholders' action that otherwise complies with this section is
not affected by the presence of holders, or the voting, of shares that are not
qualified shares.
SECTION 10.07 Indemnification of Officers, Employees, Fiduciaries, and Agents.
(a) an officer of the corporation is entitled to mandatory indemnification
under Section 10.03, and is entitled to apply for court-ordered indemnification
under Section 10.05, in each case to the same extent as a director;
(b) the corporation shall indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(c) the corporation may also indemnify and advance expenses to an officer,
employee, fiduciary, or agent who is not a director to a greater extent, if not
inconsistent with public policy and if provided for by specific action of the
board of directors, or contract.
SECTION 10.08 Insurance. The corporation may purchase and maintain liability
insurance on behalf of a person who is or was a director, officer, employee,
fiduciary, or agent of the corporation, or who, while serving as a director,
officer, employee, fiduciary, or agent of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee, fiduciary, or agent of another foreign or domestic corporation or
other person, or of an employee benefit plan, against liability asserted against
or incurred by him or her in that capacity or arising from his or her status as
a director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify him or her against the same liability
under Sections 10.02, 10.03 or 10.07. Insurance may be procured from any
insurance company designated by the board of directors, whether the insurance
company is formed under the laws of this state or any other jurisdiction of the
United States or elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock ownership or
otherwise.
18
<PAGE>
SECTION 10.09 Limits on Directors' Liability. Pursuant to the corporation's
Articles of Incorporation, and to the fullest extent permitted by the Utah
Revised Business Corporation Act, as the same exists or may hereafter be
amended, no director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for any action taken or any
failure to take any action, as a director.
SECTION 10.10 Savings Clause. If this Article or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each officer and director as to
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether internal or external,
including without limitation a grand jury proceeding and an action or suit
brought by or in the right of the corporation, to the full extent permitted by
any applicable portion of this Article that shall not have been invalidated, or
by any other applicable law.
ARTICLE XI -- MISCELLANEOUS
SECTION 11.01 Seal. The board of directors may provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the corporation and
words and figures showing that the corporation was incorporated in the State of
Utah and the year of incorporation.
SECTION 11.02 Amendments. These Bylaws, or any of them may be altered, amended
or repealed, and new Bylaws may be made, (i) by the board of directors, by vote
of a majority of the directors then in office, acting at any meeting of the
board of directors, or (ii) by the shareholders, by vote of a majority of a
quorum of the shareholders, at any annual meeting of shareholders, without
previous notice, or at any special meeting of shareholders, provided that notice
of such proposed amendment, modification, repeal or adoption is given in the
notice of special meeting. Except as otherwise provided in the corporation's
Articles of Incorporation, any Bylaws made or altered by the shareholders may be
altered or repealed by either the board of directors or the shareholders.
SECTION 11.03 Fiscal Year. Unless otherwise specified by the board of directors,
the fiscal year of the corporation shall end on the 31st day of December in each
year.
SECTION 11.04 Voting of Stock in Other Corporations. Unless otherwise ordered by
the board of directors, the chairman of the board, the president and each vice
president shall have full power and authority on behalf of the corporation to
attend any meeting of shareholders of any corporation in which the corporation
may hold stock, to vote the stock held by the corporation, to exercise on behalf
of the corporation at any such meeting any and all of the rights and powers
incident to the ownership of such stock, and to execute and deliver on behalf of
the corporation proxies and consents in connection with the exercise by the
corporation of the rights and powers incident to the ownership of such stock.
The board of directors may, from time to time, confer like powers upon any other
person or persons.
19
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